Guaranteed Income Supplement Research Articles

Replacement Rates of Public Pensions in Canada: Heterogeneity across Socio-Economic Status

Several income sources can help retirees maintain their welfare and consumption levels once they leave the workforce. One source is public pensions. Their importance as an income source varies greatly according to socio-economic status (SES). In this article, we analyze how replacement rates (RRs) of public pensions (Old Age Security and Guaranteed Income Supplement) and mandatory public pension benefits (Canada/Quebec Pension Plan [C/QPP]) vary across SES by using the Longitudinal and International Study of Adults dataset. Taking advantage of the longitudinal nature of this survey, we compute and compare average RRs by SES. We specifically consider the role of education and health to understand variations in RRs. Our results show that the average RR of public pensions for individuals in bad health is 32 percent, whereas for those who report being in good health, it is 21 percent. When public pensions and C/QPP benefits are included, these percentages become 54 percent for those in bad health and 41 percent for those in good health. When estimating a multivariate regression model and controlling for past income, we look at couples and find that past income does not eliminate differences in RR by education level and health status. Our results suggest that assortative matching could play a role in explaining the variation in RRs across individuals’ education.

Adapting Paulo Freire’s Participatory Education to Develop Self-Management Education Programs for Seniors With Diabetes

In 2015, approximately 734 million people lived on <$1.90 per day (1). In Canada, 4.9 million individuals live in poverty (2). Given the global coronavirus disease-2019 pandemic, these numbers are expected to increase (1). Poverty is a widespread issue within and between countries. Vulnerable groups, such as seniors living with chronic illness, are especially susceptible (2). Two million seniors in Canada live on $17,000 per year and receive the Guaranteed Income Supplement (3). Poverty affects health, housing, food security and quality of life.

New Canada Pension Plan Enhancements: What Will They Mean for Canadian Seniors?

How much of the enhanced Canada Pension Plan (CPP) benefit will make its way into the pockets of Canadian seniors, after it filters through Canada’s complex tax and social benefit system as income? How much will it help Canadians to maintain their living standards in retirement? To answer these and other questions, this study builds on Statistics Canada’s LifePaths dynamic microsimulation model of the Canadian population to project the implications of the CPP enhancements at full maturity (years 2070–2074). The enhancements will on average increase CPP benefits by 44 per cent across Canadian seniors. For every dollar of new CPP benefits a worker earns, approximately 62 cents will make it into their pocket. This proportion is reasonably consistent across Canadians with different lifetime earnings levels, but the dynamics vary greatly as larger CPP benefits are offset by diverse combinations of higher taxes and reduced payments from Old Age Security and Guaranteed Income Supplement. The enhancements will improve the retirement income adequacy of Canadians, particularly the third of the population without significant workplace pensions in retirement, helping an additional 12 per cent of this group to maintain their living standards in retirement.

Examining disparities in food accessibility among households in Columbus, Ohio: an agent-based model

The objectives of this study were to evaluate the effect of complex interactions among household and environmental-level factors on household-level food availability via a simulation model, the Food Accessibility Agent-based Model in Central Columbus, Ohio (FAAMC) and to test impacts of novel interventions for reducing disparities in food availability. FAAMC simulates food shopping patterns of households based on the actual location of homes and food stores, transportation network, household income, vehicle ownership, and distance to food stores. Policy interventions, which were evaluated as single or combined interventions, included: (1) reducing preference for convenience stores/partial markets; (2) increasing food availability in stores; and (3) increasing household income through a guaranteed basic income supplement program. The FAAMC estimated that mean food availability for food insecure households is 23% (95% Confidence Interval (CI): 22–24%) lower than for food secure households. Increasing household income among the poorest households may lead to a 14% (95% CI: 13–18%) increase in monthly food availability for food insecure households. Implementing multiple interventions would lead to a 41% (95% CI: 40–43%) increase in monthly food availability among food insecure households. This study exemplifies how a systems science approach may serve as an effective and efficient tool for evaluating “What if?” scenarios for improving household-level food security.

RETIREMENT INCOME PLAN MAY POTENTIALLY OFFER A GOOD LEVEL OF FUTURE CONFIDENCE

The sources of your retirement income and your strategy for withdrawing your savings can have a significant impact on your cash flow and tax consequences. We can help you calculate your current expenses, project them over your retirement, and develop the customized withdrawal strategy that works best for you. There are seven major government sources, which include Canada Pension Plan / Quebec Pension Plan (CPP/QPP), Old Age Security (OAS), Guaranteed Income Supplement (GIS), employment related sources, company pension plans, group RRSPs and deferred profit sharing plans. In addition, there are five potential personal sources, which are registered investments (RRSPs, RRIFs, LIRAs, LIFs, PRIFs, and TFSAs), non-registered investments, and Guaranteed Investment Fund (GIF) policies with Lifetime Income Benefit (LIB) options, annuities and home equity. There are five other miscellaneous resources that may exist and they are part-time employment or income from a second career, rental property income, business assets, vacation property equity and other savings.

Individual Financial Returns from Quebec Pension Plan Reform Options: Analyzing Proposals to Renew a Second-Pillar Retirement Income Program

We use simulation methods and a detailed tax calculator to analyze the likely effects of two recent proposals aimed at reforming the Quebec Pension Plan (QPP): the federal proposal, eventually implemented throughout Canada, and the Quebec government's December 2016 proposal. Accounting for education-adjusted life expectancy, earnings variability over the course of a career, and their interactions with the tax code and retirement income system, we find that internal rates of return (IRRs) for new QPP contributions are similar under both reforms for individuals with lifetime average annual earnings of more than $40,000. Both reforms yield substantial IRRs for low-income individuals. Although the Quebec proposal offers higher IRRs for individuals earning less than $40,000, the federal proposal yields greater present value benefits for these same individuals. We show that if new QPP benefits were exempted from the Guaranteed Income Supplement (GIS) clawback, and provided that the working income tax benefit and GIS were not enhanced, the two reforms would yield similar IRRs for individuals with average earnings of more than $15,000. The QPP reform would thus better focus on the middle-income earners originally targeted by reform advocates.

Greener Pastures: Resetting the Age of Eligibility for Social Security Based on Actuarial Science

We know that because of low fertility rates, rising life expectancies and the aging of the baby boom, Canada’s Old Age Dependency Ratio is rising. This will strain the sustainability of our Social Security systems and healthcare. Other countries with aging populations are raising the Age of Eligibility (AOE) for social security benefits. These include Finland, Sweden, Norway, Poland and the United Kingdom. In 2012, then Prime Minister, Steven Harper announced plans to increase the AOE for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) from 65 to 67 between 2023 and 2029. Trudeau reversed this legislation (leaving the AOE at 65) in the 2016 budget. This paper was inspired by work done in the UK for the Institute and Faculty of Actuaries State Pension Age Working Party. Our study applies their methodology onto the Canadian context. The results could be used in any country in the world, however. The UK proposal is based on actuarial and demographic logic that would see a rise in the AOE to guarantee a constant proportion of one’s adult life is spent in retirement. Thus, as life expectancy rises, there is an upward shift in the AOE for Social Security. For Canadian demographics, that constant proportion is 34 percent. Any lower value would result in an immediate need for a shift in the AOE, which we rejected. Using 34 percent triggers the first change in the AOE in 2025, which provides enough notice. The new AOE of 66 (phased in beginning in 2023 and achieved by 2025) would then be constant until 2048 when the AOE should shift to age 67 over two years. These shifts soften the rate of increase in the Old Age Dependency Ratio and bring lower OAS/GIS costs and lower required contribution rates for the CPP (both in tier 1 and the new tier 2). This, in turn, results in equity in financing retirement across generations and a higher probability of sustainability of these systems. There will also be an increase in the credibility of these systems in the public’s eye and an easing of public anxiety. One issue remains. Shifting the AOE upwards is regressive since wealthier Canadians live longer. We argue that this can be mitigated by changing the clawback formulae now used in the OAS and GIS. The Commentary concludes by proposing that the formula should become an Automatic Balancing Mechanism beyond any political interference.

'And When a Worker's Not Working?' Income Security (Welfare and Pensions) for Mobile Workers in Canada

In this paper, we provide a basic overview of the welfare and pension income security options available to workers who are (or have been) on the move (OTM) in Canada. Workers on the move, for the purposes of this paper, include: (a) a Canadian or permanent resident worker who is working and living temporarily outside of their usual or current province of residence; (b) a Canadian or permanent resident worker who has recently worked and lived temporarily outside of their current province of residence; (c) a temporary foreign worker (TFW) who was employed under a valid work permit; (d) an undocumented worker who has worked without a valid work permit. We look at the legislative frameworks and the limited academic literature that address the eligibility for and practical access to income security benefits for such workers. This paper is divided into three parts: access to welfare benefits; access to public pensions (i.e. Old Age Security (OAS), Guaranteed Income Supplement (GIS) and the Canada and Quebec Pension Plans (CPP/QPP); and, finally, access to private pensions. In each section, we summarize eligibility issues for different categories of OTM workers in a table and, when appropriate, offer a breakdown of provincial-specific information for Newfoundland and Labrador, Quebec, Ontario, Alberta and British Columbia. Academic literature on this topic is nearly nonexistent, so our presentation and analysis remains rather technical. Overall, our conclusions are that, while immigration status makes TFWs and undocumented workers ineligible for some of these income security measures (a fact that may lead them into extreme financial hardship), the fact of a worker being “on the move” does not in and of itself seem to be a significant barrier to access. And while empirical research conducted by other members of the OTM team may uncover examples of mobile workers having difficulty accessing welfare or pensions in practice because of their mobile work trajectories or because of their lack of knowledge about their entitlement to these benefits, our research does not suggest that there are significant policy barriers related to being on the move.

A Longitudinal Analysis of GIS Entries and Exits

We focus on one particular pillar of the public retirement income network in Canada, namely, receipt outcomes of the Guaranteed Income Supplement (GIS) regime. This empirical analysis is carried out in a dynamic framework. We address the extent to which individuals enter the state of GIS receipt at various ages as well as the extent to which individuals who receive GIS benefits at the earliest age of eligibility subsequently exit the regime. We first measure these transition rates, and then we focus our analysis primarily on the impact of three attributes of recipients: changes in marital status, entry cohort, and current age. The econometric equations include simple transition models of both entries and exits, as well as hazard models of the probability of exit. Among our many empirical findings is a non-trivial incidence of delayed entry into the regime as well as exit from the regime conditional on prior receipt of benefits. Women who transit from married to single status are more likely to enter, but the opposite finding is discerned for men. The hazard model for the risk of exiting the GIS regime conditioned on the duration of the ongoing spell of receipt reveals a sharp pattern of negative duration dependence.

Reforming Old Age Security: Effects and Alternatives

The federal government announced in its 2012 budget its intention to delay the age of eligibility for Old Age Security and the Guaranteed Income Supplement from 65 to 67 years. By the time the policy is fully implemented (i.e., in 2030), this delay will have increased net revenues of the fedral government by 7.1 billion dollars per year (in constant 2014 dollars), but will reduce net provincial reveues by 638 million dollars. With constant labour and savings behaviour, this delay would also increase the percentage of individuals aged 65 and 66 years who are in the low income group from 6% to 17% (for an additional 100,00 low-income seniors in this age group) and would be most harmful to low-income seniors and to women. Alternative reforms to the Old Age Security could make it possible to aochieve similar effects on public finances without having such large impacts on the low income rate among seniors.

Guaranteed Income Supplement (GIS) Status Amongst the Retired Population: An Analysis of the Incidence

Dans cet article, nous évaluons le taux d’incidence, chez les Canadiens de 65 ans et plus, du fait d’être bénéficiaire de prestations de la Sécurité de la vieillesse. La variable dépendante que nous modélisons est le taux d’incidence du fait d’être bénéficiaire de prestations de Supplément de revenu garanti (SRG). Nous estimons des équations multivariées afin de déterminer les effets de l’âge, de la cohorte, du statut matrimonial, de la province de résidence, du fait d’habiter en milieu urbain ou rural, et du fait d’être né au Canada ou non. Nous incluons également dans notre estimation les variables retardées qui portent sur le revenu et l’épargne au cours de la période précédant la retraite. Nos résultats montrent que le taux d’incidence estimé en fonction de la plupart de ces variables exogènes est assez élevé. Nous notons tout particulièrement que, toutes choses étant égales par ailleurs, les Canadiens vivant avec un conjoint ou une conjointe sont beaucoup moins susceptibles de recevoir des prestations SRG.

Economic Security in an Aging Canadian Population

Recent research indicates that today's retirees are doing very well in terms of their replacement ratios and that Canadian poverty rates among the elderly are low relative to other Organization for Economic Co-operation and Development (OECD) countries. Government-sponsored plans have been strengthened either through explicit expansion - for example, the Guaranteed Income Supplement (GIS) - or through the reform of the Canada/Quebec Pension Plans (C/QPP). Also important is the maturation of employer-sponsored pension plans, although coverage rates are down. Future generations of retirees may not achieve the standard of living that exists today, however, which is a concern. The author argues that today's economic security programs are affordable and that their costs could be stabilized if the retirement age were raised.

An urgent need to improve life conditions of seniors.

In the fall of 2007, the Government of Quebec set up a Public Consultation on Living Conditions of Seniors. Fifty sessions were held in 26 cities across all 17 regions of the province. More than 4000 seniors attended the sessions and 275 briefs were received from scientists and associations. Three themes were identified in the report published in 2008: supporting seniors and their caregivers, reinforcing the place of seniors in society, and preventing problems associated with aging (suicide, abuse, addictions). The main actions that I recommended included: Increasing the Guaranteed Income Supplement to prevent poverty; Modifying pension plans and working conditions to allow for progressive retirement; Making a major investment in home care to provide access to services regardless of place of residence; Introducing an Autonomy Support Benefit and autonomy insurance program for financing services to support people with disabilities; Generalizing an Integrated Service Delivery Network providing services to frail older people; Better training for professionals in gerontology. I also recommended setting up a National Policy on Seniors to align all government departments and agencies, municipalities and the private sector around a vision, objectives and a set of actions for improving the integration of seniors in an aging society. This would contribute to a more equitable, interdependent and wiser society. Unfortunately, the Government did not support these recommendations. It is now time for scientists to get involved in leading policy on seniors and in the political arena.

The Canadian Elder Standard – Pricing the Cost of Basic Needs for the Canadian Elderly

We determined the after-tax income required to finance basic needs for Canadian elders living with different circumstances in terms of age, gender, city of residence, household size, homeowner or renter status, means of transportation, and health status. Using 2001 as our base year, we priced the typical expenses for food, shelter, medical, transportation, miscellaneous basic living items and home-based long-term care for elders living in five Canadian cities. This is the first Canadian study of basic living expenses tailored to elders instead of adults in general, prepared on an absolute rather than a relative basis. We also accounted for an individual's unique life circumstances and established the varying effect that they have on the cost of basic expenses, particularly for home care. We found that the maximum Guaranteed Income Supplement and Old Age Security benefit did not meet the cost of basic needs for an elder living in poor circumstances.

The Impact of Drug Vintage on Patient Survival: A Patient-Level Analysis Using Quebec's Provincial Health Plan Data

There is some debate about the value received for the money spent on prescription drugs. Some argue that most drug spending is on "me-too" drugs--drugs that provide only marginal health gains. Others suggest that the opposite is true--new drugs offer good value for money and are well worth the cost. To provide evidence on this issue, we evaluated the impact of drug innovation on the longevity of Canadians. We analyzed patient-level claims data from Quebec's provincial health plan. We selected elderly patients with continuous health coverage dispensed at least one drug prescription in each year of the study period, 1997 to 2006. Drug vintage was defined as the active ingredient's earliest marketed date. We estimated the impact of drug vintage on patient survival using a time-varying Cox proportional hazards model that controlled for year indicator variables, patient age, sex, region of residence, low income status, medical services use, concomitant drug use, and comorbidities. Of the 102,743 subjects in the study population, 14,154 (14%) died during the study period. Mean patient age was 68 years; 59% were women. Our survival models indicated that the use of newer medications was associated with a statistically significant mortality risk reduction (hazard ratio: 0.522; 95% confidence interval: 0.476 to 0.572, P < 0.0001), relative to older medications. Other covariates associated with an increased risk of mortality included age, sex (male), low guaranteed income supplement status, hospitalization, and number of comorbidities. This analysis showed that recent drug innovation has had a significant beneficial impact on the longevity of elderly patients.

The Impact of Gender and Immigration on Pension Outcomes in Canada

This paper analyzes Canadian retirement incomes by focusing on the dynamics of gender and immigration. We demonstrate that elderly women living alone and post-1970 immigrants are more likely to rely on the means-tested component of Canada's pension system, the Guaranteed Income Supplement (GIS), which is an indication of their restricted capacity to maintain an autonomous household. The strong reliance of the Canadian pension system on both public and private earnings-related pensions accentuates the disparities within the labour market, causing both women and immigrants to have lower earnings in retirement. In addition, immigrants suffer from the residency requirements attached to basic pension programs.

The Impact of Gender and Immigration on Pension Outcomes in Canada

This paper analyzes Canadian retirement incomes by focusing on the dynamics of gender and immigration. We demonstrate that elderly women living alone and post-1970 immigrants are more likely to rely on the means-tested component of Canada's pension system, the Guaranteed Income Supplement (GIS), which is an indication of their restricted capacity to maintain an autonomous household. The strong reliance of the Canadian pension system on both public and private earnings-related pensions accentuates the disparities within the labour market, causing both women and immigrants to have lower earnings in retirement. In addition, immigrants suffer from the residency requirements attached to basic pension programs.

Negative Effects of the Canadian GIS Clawback and Possible Mitigating Alternatives

In Canada there are three main sources of government-provided retirement income: the Canada/Quebec Pension Plans (C/QPP), which have benefits and contributions based on earnings up to the Yearly Maximum Pensionable Earnings; Old Age Security (OAS), which is a fixed amount for most but does include a “clawback” of benefits for high-income individuals; and the Guaranteed Income Supplement (GIS), which is designed to supplement those persons with extremely low income. The annual GIS benefit is reduced, or clawed back, by 50 cents for every dollar of annual income the person has in retirement, including C/QPP and income from Registered Retirement Savings Plans (RRSPs) and other savings. OAS benefits are not included in determining the GIS clawback. The result of this is that low-income individuals who attempt to enhance their retirement replacement ratio actually see a decrease in government-provided support the more they save for retirement. Savings in an RRSP can effectively be taxed at more than 100% through corresponding reductions in the GIS, social housing, home care, GAINS (Ontario’s Guaranteed Annual Income Supplement), and other benefits that are based on one’s personal retirement income. This paper explores alternatives to the 50% GIS clawback, including a basic GIS exemption, a GIS clawback rate lower than 50%, and a combination of the two. The goal is to improve the fairness of the GIS and reduce the disincentive to save for retirement, without increasing the overall cost of the program significantly.

Transfers Matter Most: How Changes in Transfer Systems of Canada and the United States Explain the Divergence in Household Poverty Levels from 1974-1994

From 1974 to 1994, Canada and the United States experienced quite substantial divergences in relative household poverty rates and inequality levels from similar starting points.Although several scholars have attempted to explain Canadian and U.S. differences in poverty and inequality levels at one point in time, none have satisfactorily explained the causes of these divergent trends. Utilizing high quality, comparable data from the Luxembourg Income Survey, my analysis of the household poverty rates demonstrates that differences in the policies and reforms of the two country’s transfer systems explains the divergence relative household poverty rates. The data also seriously cast doubt on other potential market, cultural, or tax system explanations. Further, by selectively removing the income from each specific category and then specific type of transfer income and recalculating the household poverty rate, my “sensitivity-type” analysis clearly demonstrates the predominant explanatory power for differences in the structure and reforms of social insurance transfers income and, more specifically, social retirement benefits. In Canada, the expansion of the Guaranteed Income Supplement (GIS) for low-income elderly families over this period provides the only plausible explanation for the dramatic reduction in the poverty rate of the elderly households relative to the United States and, perhaps somewhat surprisingly, explains most of the divergence in household poverty rates between the two countries from 1974 to 1994. As a large part of the divergence in inequality rates is also driven by reduction in household poverty rates in Canada relative to the United States, the expansion of the GIS benefits also provides a major explanation for the divergence in levels of household inequality over this period.

TILTING TOWARD MARKETIZATION: Reform of the Canadian Pension Plan

ABSTRACTPublic concern about the earnings‐related Canada Pension Plan has forced the Canadian government to move toward fuller funding, a new investment policy, and changes to benefits and administration. Together, the three initiatives, and particularly the first two, amount to a modest degree of marketization. The assumption behind the reform is that the Canada Pension Plan will remain public and mandatory but the change will create a board and an investment policy which are more sensitive to market pressures and less amendable to government interference. The Canada Pension Plan is one of three tiers of support for the elderly in retirement. It is a contributory social insurance scheme which protects against loss of income. The other two are a social allowance (Old Age Security) as well as an income tested benefit (Guaranteed Income Supplement) which provide basic income support and employment based retirement pension plans as well as group and individual registered retirement savings plans which supplement the other two tiers on a voluntary basis. This article examines the reform of the Canada Pension Plan. After a brief examination of Canada's retirement benefits in an international context, the article summarizes recent debates in Canada, government policies to develop fuller funding and new investment strategies, and reflections on possible developments in the future.