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Canada’s safety net for seniors is fraying, says OECD

The Organization for Economic Co-operation and Development's new report on pensions is an eye-opener for anyone who questions the need for an upgrade of Canada's income support system for seniors. Our social safety net for retirees is fraying.

The OECD, an economic policy forum representing the world's developed countries, on Monday issued report cards for its member countries and all G20 nations on the health of their pension systems and their ability to adequately support their seniors in retirement. Its report on Canada showed a country that is allowing an increasing number of seniors to slip into poverty, and a government that isn't doing enough to help them.

First, though, the good news: Canada's rate of old-age poverty is the 10th-lowest in the 34-member OECD. Just 7.2 per cent of Canadians over the age of 65 are living below the poverty line, well below the OECD average of 12.8 per cent. (By contrast, in the United States nearly 20 per cent of seniors live in poverty.) Among the G7, only France's senior poverty rate is lower than Canada's.

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But the bad news is that while most OECD countries have reduced their old-age poverty rates since 2007, Canada's has increased by roughly two percentage points. That's about 130,000 more seniors living in poverty in this country than there were five years ago.

Canada's government is part of the problem. Government transfers to seniors – in the form of Canada Pension Plan (CPP), Old Age Security, etc. – account for just 39 per cent of seniors' income in this country, far below the OECD average of 59 per cent. Government spending on old-age pensions is equivalent to 4.5 per cent of gross domestic product – again, woefully short of the OECD average of 7.8 per cent.

Canadian seniors rely heavily on private pension plans and savings for their retirement income – those sources account for 42 per cent of Canadian seniors' incomes, versus just 18 per cent for the OECD average. (The remainder is income from employment.) That's a worrisome number given that employer pension plans, especially defined-benefit plans that provide an assured stream of income throughout retirement, are becoming an endangered species in this country. (Only about one-third of Canadian workers are members of any sort of private pension plan.)

All of this gets to the root of why, when federal Finance Minister Jim Flaherty talks about putting off enhancements to the CPP to some undefined later time, he's making a dangerous mistake. The evidence shows that Canadian seniors are already relying much more heavily than most on other sources of income to keep their heads above water – and a fast-growing number of them are finding it's not enough. And our government hasn't directed enough resources to protect them.

Perhaps the government will take comfort in the fact that poverty among seniors is not yet a statistical problem in this country, but we're headed in the wrong direction. We mustn't sit on our hands and watch an eroding situation get worse.

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