June 2018 - Pension Point of View
Survivor benefits have existed in Canada since before the Canada Pension Plan (CPP) was introduced in 1965. They protect a deceased contributor's surviving spouse or common-law partner against financial distress. The benefit operates under the original assumption that a deceased spouse with a pension (probably a man) was the primary breadwinner in his household, and that his widow will live with limited financial security. In essence, survivor benefits function as a safety net for widows who provided unpaid labour in the home, or if they were employed, did not accumulate enough toward their own pension.
Pension law requires that at retirement, a member who has a spouse must be offered a joint-and-survivor pension that makes payouts until both partners die. While pension administrators typically encourage the member to provide for the spouse, some plans, such as the BC Public Sector Pension Plans, may offer a spouse the option to waive their pension rights.
Sociodemographics have changed dramatically since the introduction of survivor benefits , and pension plans are adapting. Data from the 2016 Census show a significant increase in “one-person households” and “other-family households” that aren’t composed of a couple and their dependent offspring., The question arises: do survivor benefits still make sense in an era when women are better represented in the workforce and the composition of family households are becoming more diverse?
Who’s covered under survivor benefits? Who isn’t?
Depending on the plan, survivor benefits may entitle a spouse to a good percentage of what the member is promised: it can range from 50 per cent to two thirds to 75 per cent and may even be 100 per cent. In BC, the Pension Benefits Standards Act deems that a deceased pension plan member’s spouse, who hasn’t waived their pension right, is entitled to receive, at minimum, 60 per cent of the member’s pension;. In contrast, a non-spouse beneficiary has no entitlement to a survivor benefit in the event of the death of the member after retirement, but may receive continuing payments of the member’s pension for a period of time if the member selected a time guarantee on their single life pension.
“Spouses” are defined as married couples who have not lived separately for longer than two years continuously, or couples who have been living together in a marriage-like relationship for at least two years. The definition under BC legislationhas evolved to include unmarried and same-sex couples. Either spouse in a couple may qualify for survivor benefits with the other’s pension. But, what about adult dependants who aren’t spouses by definition? Should non-spouses who support and rely on one another in a shared home be entitled to survivor benefits?
For instance, two adult siblings with pensions who share a home and support each other financially would not be entitled to survivor benefits. This was an issue for sisters Betty Wilsack and Margaret Renouf in Nova Scotia. Though they’ve lived together for 40 years of their adult lives, contributed equally to household expenses and co-parented Renouf’s son in their shared home, pension benefits standards legislation excludes them from the entitlements of surviving spouses. Yet from an economic perspective, their relationship is no different from that of two spouses.
Wilsack and Renouf began advocating for legislative reform by contacting their member of parliament and starting a public dialogue. They found many other Canadians in similar living arrangements who felt disadvantaged by the law.
According to the 2016 Census, eight per cent of Canadian households are categorized as “other family households” or “non-family households of two or more.” In addition, Statistics Canada reports that “multigenerational households” are the fastest growing type of household in Canada. A multigenerational household is defined as a household with at least three generations represented. An example is one where parents live with their children and grandchildren to both provide and receive support. Although multigenerational households only account for three per cent of all private households, their number more than tripled since 2001 and will likely continue to grow.
Certain demographics of Canadians are more strongly represented in other-family households or multigenerational households. For instance, multigenerational households are more common within indigenous and immigrant communities. The proportion of multigenerational households is larger in Nunavut and the Northwest Territories—regions with large indigenous populations—and these households are more widespread in urban centres with higher proportions of immigrants, such as Abbotsford-Mission and Vancouver.
Furthermore, in 2016, over a third of adults aged 20 to 34 were living with their parents, compared to only a quarter in 2001. Young adults may live in their parents’ home to save money so they can start their own households, and they may also live there to provide support—which could be financial, health care or other.
Arguably, adults in these various “other” and “non-family” households rely on one another in the same way as spouses who depend on their partners. Should pension plans treat them the same?
Who carries the burden?
Although many Canadians live in multigenerational households, many more are living alone. The increasing population of single Canadians raises a separate question concerning survivor benefits: are single pensioners unfairly burdened by survivor benefits?
The 2016 Census revealed that one-person households have become the most common type of household in Canada (28.2 per cent of total). There have never been more one-person households in Canada than there are now. Although single members of a pension plan are not connected to recipients of survivor benefits, in some plans they must still contribute at a rate designed to fund both members’ pensions and survivor benefits. And because survivor benefits continue for the remainder of a spouse’s life, a married member may receive a benefit that has a higher overall value than that of a single pensioner’s benefit under the same plan.
In some plans, such as the BC Public Sector Pension Plans, the cost of providing a joint-life pension to a member with a spouse –as opposed to providing a single-life pension –is paid for by way a joint-life reduction. As such, a benefit adjustment compensates for the “spousal impact” since the contribution rate isn’t designed to fund both parts of the pension. The joint pension that provides continued benefits once the primary retiree has passed away will be lower than for a single pension that specifies no survivor.
In 2016 and 2017, John Duncan argued at the BC Human Rights Tribunal and then the Supreme Court that the Retail Wholesale Union Pension Plan discriminated against him when it applied a different benefit to him as a single member than is applied to a married member. The BC Human Rights Tribunal found that, as a bona fide pension plan, the Retail Wholesale Union plan was exempt from the Human Rights Code section prohibiting discrimination on the basis of marital status., The BC Supreme Court sent the decision back to the tribunal, instructing it to respect Canadian Charter of Rights and Freedoms values when considering Duncan’s complaint. This case illustrates the ongoing uncertainty around interpreting rules for single and married members, and the complexity of balancing established plan provisions against prohibitions against discrimination under the Charter.
Another single pensioner brought a similar complaint to the Ontario court in 2017. Reva Landau asked the court to declare that the rules providing survivor benefits under the CPP violated the equality protections of the Canadian Charter of Rights and Freedoms. An actuary estimated Landau’s estate would receive $60,000 to $115,000 more if she had a spouse to receive survivor benefits when she died. The judge found Ms. Landau should have brought this issue to the Social Security Tribunal of Canada rather than the Ontario Superior Court of Justice, and did not decide her complaint on its merits.
In summary, a decision on whether the rules that govern survivor benefits need to be changed to reflect changes in society remains outstanding. Going forward, single members may need to convince decision makers that widows are no longer a vulnerable group in need of protection, and that the policy rationale for survivor benefits has therefore weakened. On the other hand, one might argue that the changing make-up of households calls for an expansion of survivor benefits to cover “dependents” beyond spouses. How such expanded benefits would be “fairly” costed is another question altogether.
Bringing on pension reform
Do Canadians still value the principles behind survivor benefits enough to continue the practice? If yes, should survivor benefits be expanded to protect adult dependants other than spouses? Or should survivor benefits be scrapped altogether in light of the growing number of one-person households?
For pension reform to occur, it’s likely Canadians will have to continue bringing this topic to the attention of legislators, legal decision makers and the public at large. It remains to be seen whether judges and elected officials will respond to the demands of modern Canadian families.
 Daniel S. Gerig and Robert J. Myers, “Canada Pension Plan of 1965,” Social Security, November 1965, https://www.ssa.gov/policy/docs/ssb/v28n11/v28n11p3.pdf.
 Jonathan Chevreau, “Survivor benefits: A guide to CPP, OAS, GIS and more,” MoneySense, August 24, 2017, http://www.msn.com/en-ca/money/retirement/survivor-benefits-a-guide-to-cpp-oas-gis-and-more/ar-AAqDgsZ.
 “Other family households,” along with “one-person households,” is used here to describe family units that do not consist of two parents and their dependent children (nuclear family).
 “Families, households and marital status: Key results from the 2016 Census,” Statistics Canada, August 2, 2017, http://www.statcan.gc.ca/daily-quotidien/170802/dq170802a-eng.htm.
 Pension Benefits Standards Act, SBC 2012, c. 30.
 Cassie Williams, “Nova Scotia sisters who’ve lived together 38 years want survivor benefits,” CBC News, Oct 28, 2016, http://www.cbc.ca/news/canada/nova-scotia/nova-scotia-sisters-living-together-benefits-pension-access-1.3826095.
 Nathan Battams, “Sharing a Roof: Multi-generational Homes in Canada (2016 Census Update),” The Vanier Institute of the Family, Oct 2, 2017, http://vanierinstitute.ca/multigenerational-homes-canada.
 “Young adults living with their parents in Canada in 2016,” Statistics Canada, Aug 2, 2017, http://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-x/2016008/98-200-x2016008-eng.cfm.
 Duncan v. Retail Wholesale Union Pension Plan, 2017 BCSC 2375, Docket: S179454 (CanLII Dec. 22, 2017). https://www.canlii.org/en/bc/bcsc/doc/2017/2017bcsc2375/2017bcsc2375.html.
 Landau v. Attorney General of Canada, 2017 ONSC 2938, Court File No: CV-16-558269 (CanLII May 12, 2017). https://www.canlii.org/en/on/onsc/doc/2017/2017onsc2938/2017onsc2938.html.
Following the success of last year’s first-ever education event, Pension Corporation hosted a second event for trustees of the five pension plans it serves on April 24, 2018. It was the perfect time to give them a behind-the-scenes look at the day-to-day interactions the corporation has with plan members. The event, held at the Delta Ocean Pointe Resort, coincided with the annual Public Sector Pension Conference, and is one of the ways the corporation engages with trustees to inform them about the important work it does on their behalf.
Trustees heard directly from Pension Corporation staff about new technology in the member services centre, new services available online for members, how the corporation keeps member information secure, and how they support change initiatives within the organization from beginning to end.
“We had positive feedback from trustees about the opportunity to speak directly with staff and learn about the work they’re doing,” said Aaron Walker-Duncan, vice president of Board Services. “Connecting with frontline staff and those working in different areas of the business gives trustees a broader view of the service we provide to their members.”
Staff members were on hand to speak with the trustees about how they connect with plan members and answer questions. “Trustees were interested in what happens behind the websites and it was nice to hear feedback on the team’s effort,” said David O’Regan, a business process manager. “They also had some general questions about how we work, so I discussed our agile approach. It felt good to participate.”
David O’Regan (left) and Tami Rober (centre) connected with trustees about the role of the Business Services branch at Pension Corporation
Shannon Maxwell, a client service representative, agreed. “It’s always a pleasure interacting with trustees. Putting faces to the names we see on board communiqués and other products reminds me of the bigger picture we are all working towards.”
Following the presentations from staff, trustees heard from Jamie Sawchuk and Jamie Ross of Deloitte on exponential growth in technology and automation, and its potential impact on pension plan members. It was a glimpse at some of the challenges and opportunities facing the pension industry in the future.
Trustees participated in online polling during the presentation
With positive feedback from both trustees and staff, it is clear the evening was enjoyable, educational and a great accomplishment.
The Pension Fund Revolution
by Peter F. Drucker
Peter Drucker, best known for his writing on management theory and practice, also wrote a book about pension funds: The Unseen Revolution (Butterworth-Heinemann, 1976), later republished as The Pension Fund Revolution (Transaction, 1995). In the book, Drucker argues that ownership of the means of production has been socialized without being nationalized through pension fund ownership. He further argued that pension funds, as large institutional investors, have become the controlling owners of capital.
Many of the predictive elements of the book have proven false, but Drucker wrote an epilogue in the early 1990s (published in the 1995 edition) where he reviews the events of the preceding 15 years. At that point, institutional investors—primarily pension funds—owned close to 40 per cent of the U.S. public equity market and almost 40 per cent of the medium- and long-term debt of the United States’ largest companies.
Drucker’s analysis says trustees of pension funds—especially large, public employee funds—are no longer simply investors in shares seeking to maximize a return; they’re now owners who must take an interest in how companies are managed to ensure long-term success. He covers at length how pension fund ownership has changed the governance of corporations.
Notwithstanding the over 40 years since the book was written, it’s worth a read. It offers a historical view on the evolution of pension plans as investors in the world economy. It’s also interesting to see with the benefit of hindsight how close to the mark (or not) Drucker was with his predictions for the future.
“The rise of pension funds as dominant owners and lenders represents one of the most startling power shifts in economic history.”
In 2017, Statistics Canada released its 2016 Census data. Demographic shifts in areas such as increased longevity, ethno-cultural diversity and housing costs all affect how Canadians live. As family demographics and longevity shift and evolve, we must consider whether pension plans will continue to provide the benefits that are relevant to their members.
For the first time, “one-person households” became the most common type of household in Canada. In 2016, 13.9 per cent of the population aged 15 and older lived alone, compared to 1.8 per cent in 1951, which means this demographic has grown 772 per cent.
Since 2001, the number of “multigenerational households” in Canada has grown 37.5 per cent, making this the fastest-growing type of household: 2.2 million people live in a multigenerational home.
Families and couples across Canada
The definition of family is no longer limited to genetic relatives. Instead, our families are made up of friends, co-workers, neighbors or anyone who makes a valuable contribution to our lives. There are 9.9 million families in Canada that are as unique and diverse as the individuals that compose them.
At the heart of many of these families is a couple, and just like todays families, today’s couples have evolved to reflect the many ways people choose to come together and share their lives. The Vanier Institute of the Family used the 2016 Census to build a snapshot of today’s diverse family and couple makeup. Here’s what the institute had to say:
- 67 per cent of families in Canada are married-couple families,17 per cent are living common-law, and 16 per cent are lone-parent families –—these are diverse family structures that continuously evolve
- 464,000 stepfamilies live across the country, accounting for 13 per cent of couples with children
- 363,000 households contain three or more generations, and there are also approximately 53,000 skip-generation homes (composed of children and grandparents, with no middle generation present)
- 1.4 million people in Canada report having an Aboriginal identity (61 per cent First Nations, 32 per cent Métis, 4.2 per cent Inuit, 1.9 per cent other Aboriginal identity, 0.8 per cent more than one Aboriginal identity)
- 360,000 couples in Canada are mixed unions, accounting for 4.6 per cent of all married and common-law couples
- 65,000 same-sex couples were counted in the 2011 Census, 9.4 per cent of which are raising children
- 68,000 people in Canada are in the CAF Regular Forces, half of which have children under age 18
Modern couples in Canada
- In 2016, married couples accounted for 79 per cent of all couples in Canada, down from 93% in 1981
- A quarter of never-married Canadians say they don’t intend to get married
- In 2016, 21 per cent of all couples in Canada were livingcommon-law, up from 6 per cent in 1981
- The share of twenty-something women and men living in couples has nearly halved since 1981 (falling from 59 per cent to 37 per cent and 45 per cent to 25 per cent, respectively)
- In 2016, 12.4 per cent of all couple families in Canada with children under 25 were stepfamilies, down slightly from 12.6 per cent in 2011
- There are 73,000 same-sex couples in Canada in 2016, 12 per cent of which are raising children
- 1 in 5 surveyed Canadians reported in 2011 that their parents are separated or divorced, up from 10 per cent in 2001
- The share of people living in mixed unions nearly doubled between 1991 and 2011, from 2.6 per cent to 4.6 per cent
- 69 per cent of couples with children were dual-earner couples in 2014, up from 36 per cent in 1976
Working seniors in Canada
As life expectancy increases, Canada is seeing more and more seniors living beyond aged 65; in fact it is no longer uncommon to live into the hundreds. On census day in 2016, 16.9 per cent of the population was aged 65 and older. The census tells us that many seniors are actively engaged in unpaid work, like volunteering and caregiving, and 19.8 per cent are employed either part time or full time. This number has doubled since 1995 to just over 1 million working seniors, with 30 per cent working full time. This is the highest number of working seniors reported since 1980.
Senior men are more likely to work then senior women. However, the number of working women aged 65 has shown more pronounced growth than men of the same age. The number of working women has more than doubled since 1995.
While the 2016 Census doesn’t tell us if these seniors are working by choice or necessity, it did find that 43.8 per cent claimed employment income as their primary income; this is up from 38.8 per cent in 1995. Of the seniors who worked full time, 70.3 per cent stated employment income as their primary income; this is up from 38.5 per cent in 1995. Only a third of seniors who worked part time declared employment income as their primary income.
Today’s seniors are more educated than those of previous generations, which is a factor that can play into whether a person chooses to continue working beyond age 65. Those with a bachelor’s degree or higher were twice as likely to continue to work beyond age 65, compared to those with only a high school education.
Private retirement income may also play a part in why a senior decides to work. Seniors without a private retirement income are 1.5 times more likely to work beyond age 65, and in a full time capacity. Of seniors aged 65 to 69, 40.6 per cent without a private retirement income worked, compared to 23.9 per cent of those with private retirement income.
According to the census, where a senior resides also affects whether they continue to work. Those who live in the territories and rural areas are more likely to continue to work. In Nunavut, 42.2 per cent of seniors work in some capacity, with 20.2 per cent working full time. In BC, just over 20 per cent of seniors work, with only about 6 per cent working full time. Newfoundland and Labrador had the lowest percentage of working seniors.
There are many factors that affect whether a senior works and in what capacity (part time or full time). The 2016 Census tells us that today’s seniors continue play a role in Canada’s labour force, which is taking some of the pressure off the labour market caused by retiring baby boomers.
Retirement ages around the world
In November 2017, the Fraser Institute published “The age of eligibility for public retirement programs in the OECD.” The OECD predicts the proportion of retired to working-age people will increase from 28 per cent in 2015 to 51 per cent by 2050 for OECD countries. All OECD countries are looking at pension reform to help mitigate the anticipated pressure on public retirement programs.
This report looks at one particular reform measure most OECD counties are implementing: increasing the age of eligibility for public retirement programs. Of the 22 high-income OECD countries, 18 are increasing the age of eligibility for public retirement programs. Canada is one of the five countries that has not implemented any reforms. Canada originally announced age-of-eligibly changes under the former Conservative government in 2012 but the decision was reversed by the current Liberal government in 2015. Here’s how the age of eligibility changes stack up across the 22 countries: Fraser Institute - The Age of Eligibility for Public Retirement Programs in the OECD
 “Portrait of households and families in Canada,” Statistics Canada, August 2, 2017, http://www.statcan.gc.ca/pub/11-627-m/11-627-m2017024-eng.htm
 “Families, households and marital status: Key results from the 2016 Census,” Statistics Canada, August 2, 2017, http://www.statcan.gc.ca/daily-quotidien/170802/dq170802a-eng.htm
 “Infographic: Family Diversity in Canada 2016,” The Vanier Institute of the Family, May 11, 2016, http://vanierinstitute.ca/family-diversity-2016/
 Statistics Canada defines a mixed union as “a couple in which one spouse or partner belongs to a visible minority group and the other does not, as well as a couple in which the two spouses or partners belong to different visible minority groups”
 “Infographic: Modern Couples in Canada, The Vanier Institute of the Family, August 4, 2017, http://vanierinstitute.ca/infographic-modern-couples-canada/
 The Organisation of Economic Co-operation and Development (OECD) is made up of 35 of the world’s most industrialized countries