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Go to article index for other editions of Bob Orrick's IN RE (In the Matter of).

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What is a Senior Citizen?

By Bob Orrick

[Second of two parts - first part found at What is a Senior Citizen? (part 1)]

Canada opted into the mandatory retirement programme in 1927, several years before the U.S. saw the light. In Canada, federal and provincial governments financed the initial programme. It was available to Canadian citizens 70 years or older. In 1952, the Old Age Security Act came into force. Over the years, several amendments have been made to it. In 1965, the 70 years of age requirement was dropped to 65 years. The Old Age Security programme is financed from Government of Canada general tax revenues.

The Canada Pension Plan [CPP] and the Quebec Pension Plan [QPP] were introduced in 1966 as fully portable plans that offered retirement, survivor, disability and death benefits. These benefits provided protection for spouses and common-law partners.

The Guaranteed Income Supplement was established in 1967 followed by the introduction of full annual cost-of-living indexation in 1972.

A Spouse's Allowance was established in 1975 with an extension to all low-income widows and widowers aged 60 to 64 in 1985. Other amendments were introduced along the way with the extension of benefits and obligations to same-sex common-law partners in 2000.

By way of comparison, the maximum yearly pension benefit, in 1927, was $240 - today that would be $2,500.

To qualify for Old Age Security pension, a residence requirement must be met. An applicant's employment history is not a factor in determining eligibility, nor does the applicant need to be retired. Old Age Security pensioners pay federal and provincial income tax. Higher income pensioners also repay part or all of their benefit through the tax system. [Overview of the Old Age Security Programme, Human Resources Development Canada] An applicant must be a Canadian citizen or legal resident of Canada on the day preceding the applicant's approval, or, if no longer living in Canada, must have been a Canadian citizen or a legal resident of Canada on the day preceding the day he or she stopped living in Canada. A minimum of 10 years of residence in Canada after reaching age 18 is required to receive a pension in Canada. There are other eligibility requirements but these cover the most general ones that affect most applicants.

In Canada, population ageing is accelerating. In 1973, only seven per cent of Canadians were 65 or older; this rose to 13 per cent in 2003. By 2020, 20 per cent of Canadians will be over 65 years. The worry is a workforce where the proportion of non-workers to workers is shrinking rapidly. In 2002 there were six workers in Canada for every retired person. By 2020, there will be three workers for every retired person. The ratio will sink further without a dramatic increase in immigration [or young Canadians hop to the bedroom in droves.]

A decade or so ago popular thinking related increased automation to shorter workweeks for all. Now this is a prospect only for the far future as developed countries appear no closer to building social structures that take advantage of all the new technology and give more leisure to the population as a whole. [Retirement at 67 going on 70]

The challenge to Canada is to deliver a much broader range of accepted retirement age with 55 to 75 as the range. Some adjustments have already been made. Because people live so much longer and retire so much earlier, Ottawa has demanded higher contributions to the Canada Pension Plan so it will not dry up. [See later in the piece for how this has been addressed.] [Retirement at 67 going on 70, 50More NewsWeb]

Canadians are entitled to the Guaranteed Income Supplement [GIS]. This is a monthly benefit paid to residents of Canada who receive a basic, full or partial Old Age Security [OAS] pension and who have little or no other income. GIS payments may begin in the same month as OAS. This benefit is not subject to income tax. To receive the GIS, the combined income of the applicant and spouse or common-law partner cannot exceed certain limits. The amount of GIS received depends on his or her marital status and income.

In 2000, OAS and Canada Pension Plan [CPP] benefits were extended to same-sex couples, who are now entitled to the same rights and obligations as spouses and common-law partners.

The question on the minds of many Canadians is, can these pensions, in particular the Canada Pension Plan, be sustained?

According to both the World Bank and the Organisation for Economic Co-operation and Development, Canada's retirement system is one of the best in the world. The aforementioned organisations regard Canada's approach of a mix of public and private pensions as the most effective way for countries to provide retirement income needs. This diversified approach makes the Canadian retirement income system less vulnerable to changes in economic and demographic conditions, such as ageing, than systems in other countries. [Department of Finance, Canada, Backgrounder, Canada's Retirement Income System, news release 2003]

In Canada, the retirement income system is founded on three pillars - two public and one private.

1: The federal OAS programme ensures that most people over 65 are provided with basic income support. It is funded from general federal government revenues.

2: The jointly stewarded CPP, and Quebec's parallel programme, provides basic earnings-related pensions for all workers. Contributions from workers and their employers, as well as investment earnings, pay for benefits.

3: The private pillar of tax-assisted registered pension plans and registered retirement savings plans encourage voluntary saving for retirement. [ibid.]

Inasmuch as Canada has quality pensions programmes, regrettably there are still many workers past the retirement age of 65 years who, for various financial circumstances, must continue to work. There are others; however, who chose to stay on the job well past 65 years of age. Such senior citizens are, one would suspect, in the private sector where union contracts might not have a direct affect on the age of retirement.

In 1997, the federal and provincial governments agreed to significant reforms to the Canada Pension Plan to ensure its long-term financial sustainability. These reforms include a progressive increase in the contribution rate to 9.9 per cent in 2003 as well as changes to benefits, administrative changes and the investment of plan assets not immediately required to pay benefits in a diversified portfolio of securities at arm's length from governments. Together, these changes are helping to ensure that a reserve fund exists to pay for the plan's growing costs, primarily due to the baby boom generation in the coming years, and to help keep the plan sustainable for future generations. [ibid.]

Otto von Bismark would undoubtedly be rather surprised and possibly pleased to see his 1889 mandatory retirement age of 65 years spread to much of the world. Just think, what if old Otto had picked 50 out of the air rather than the 65. After all, the life expectancy in Germany in Otto's time was 45 years.

After all is said and done, senior citizens, at least in Canada, are fairly well supported despite their complaints that the Government of Canada knows little and produces even less.

Enjoy your retirement, regardless of age!

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