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November 2017


The brain bank: managing finances in old age



As we grow older, most of us will experience a decline in our mental faculties. While a lucky few are “super agers” who seem to have little cognitive change into old age, average folks like us will find our memory and thinking skills deteriorating. In some cases, this process is hastened by Alzheimer’s or other degenerative diseases of aging.

We spoke to three experts (a neurologist, seniors’ advocate and representative from BC Pension Corporation) about how to support financial skills in aging pension plan members. Long-term engagement with members about their pensions—with the aid of technology—could make a difference in their financial empowerment after retirement.

Building a brain bank

In Victoria’s quiet Caffé Misto, Dr. Alexandre Henri-Bhargava sips a cup of coffee with the particular appreciation of a sleep-deprived parent. A behavioural neurologist and specialist in aging, he works at the Island Medical Program—a partnership between the University of Victoria and University of British Columbia—as director of the Clinical Skills Program, site head for neurology education and medical educator. He runs a busy practice, parents his two young kids and is exactly the kind of warm, calm and focused person you want caring for your elderly family and friends.

“Generally speaking, what we call crystallized intelligence—that’s intelligence measured by things like your vocabulary or your general knowledge of the world—won’t decrease with age,” notes the soft-spoken doctor.

Effectively managing finances as we age, he explains, depends in part on our unique set of financial skills. Over our lives, we accrue a variety of abilities and experiences with money that we bank in our brains: practices we learned from our parents, budgeting on our own when we moved out, and so on. The more familiar we are with financial concepts, through repetition and practice throughout our lives, the more likely these concepts become crystallized in our brains and persist into old age.

“If people are financially literate, the concepts are still there [in old age],” says Dr. Henri-Bhargava. “So they may have forgotten that they transferred something from one investment to another last month, but generally speaking they know that through their life, they had a pattern of investment, etc. It’s a lot easier to work with somebody at that stage than teaching an old dog new tricks.”

Engaging with technology

If we develop a high level of financial skill in early and mid-life, it may mean that, despite mental decline as we age, we can continue to manage our own finances. Accountants might effectively manage their financial affairs well into old age (assuming other areas of decline don’t interfere) because of their crystallized financial intelligence. Someone who rarely managed money and has few financial skills—perhaps because a spouse took care of things—might see negative financial consequences from a decline. Not surprisingly, seniors with weak financial skills are particularly vulnerable to financial abuse.

Back in Victoria, Kevin Olineck settles into a chair in his office at BC Pension Corporation. The vice-president of Member Experience is excited about what the future holds for members of BC’s five public sector pension plans.

“I’m looking forward to being able to connect with members at key points throughout their careers,” Kevin says with a smile.

“We raised the bar for members by increasing their channels of choice,” he explains. “We are seeing a shift in the way plan members interact with their plan. We’re putting them first, giving them choice, asking them what they need and responding to those needs.”

One of the top needs plan members identified was being able to connect with their pensions on their own terms and in familiar language. Moving to a digital-first, member-centric environment makes pension concepts and language more accessible to plan members because they can consume online information at their convenience—when they’re receptive—in a way that’s easier to understand. As members interact more frequently with their pensions and get more out of those interactions, they are familiarizing themselves with key concepts in the pension world, which increases the quantity and quality of the financial experience stored in their memory banks. With more crystallized financial intelligence, plan members stand a better chance of avoiding financial abuse in old age and are more likely to make appropriate financial choices.

Guarding against financial abuse

From her downtown Vancouver office at Seniors First BC, Grace Balbutin sighs into the phone. As director of the Seniors Abuse and Information Line (SAIL), a toll-free helpline providing information about abuse to seniors and those who care for them, she hears a lot of horror stories.

“SAIL responds to over 3,500 calls a year, and calls are increasing yearly. In 2016, roughly 1,600 of those calls were about elder abuse and by far the most common kind of abuse we hear about is financial abuse,” says Balbutin, who goes on to list the many ways seniors are financially exploited. Income cheques taken away and cashed, money taken from joint bank accounts, pressure to change wills, skimming, outright theft—the list goes on.

“Social isolation is a big factor in making an older person vulnerable to abuse,” she explains. “Isolation can happen at any time. It can even be that the person has family or other people around for support but just doesn’t feel connected with them. What we find, though, is that seniors are especially vulnerable at times of transition: when they have recently lost a partner, family member or friend, or when they have been diagnosed with a disease or serious health condition.”

And while anonymous scammers may make headlines, the vast majority of financial abuse cases involve people known to the victims—family members, neighbours, caregivers. Developing an individual’s financial skills cannot guard them against the isolation that makes them vulnerable to abuse, but it can give them the confidence to call out abuse in its early stages.

Balbutin points out that much more proactive work needs to be done to help people become financially savvy earlier in life. Seniors First BC offers a series of workshops on elder abuse, including financial abuse. She would like to see the workshop program expanded, and more education and discussion generally. Again, an early investment in financial skills pays off later in life.

“We need education before the abuse happens, not after.”

Looking ahead

Over at Caffé Misto, Dr. Henri-Bhargava downs the last of his coffee and muses on what the future of technology holds for an aging population.

“We, as a society, value autonomy above protectionism of a person. We allow people to live their lives [potentially] making poor decisions,” he says, pointing out that technology is likely to change more quickly than culture. “You can check your own blood pressure or go to a pharmacy and get it checked. As our day-to-day implements become technologically aware, can we harness that data? For example, many people now have smart fridges. So if a person consistently lets the milk spoil, and the fridge ‘knows’ about it, could that information get sent to their GP?”

And might technology (smart or otherwise) play a role in overcoming the inertia many plan members have when it comes to their pensions? As the plan websites change and My Account functionality develops, possibilities for interacting with members are expanding. Still, most members are automatically enrolled in their plan and their contributions are automatically deducted from their paycheques. It may remain challenging to encourage plan members to engage with their pensions. Could there be a Fitbit for financial fitness and pension pulse checks?

Dr. Henri-Bhargava’s musings raise another bigger question: is it a pension plan’s responsibility to develop financial skills in plan members?

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Sex, gender and defined benefit pension plans

A summary of the changing legislative landscape and the potential impact to defined benefit pension plans



Since our June publication, Canada has seen a flurry of legislative activity around disclosing sex on identification documents. Passports now have an option for ‘X’ alongside ‘M’ and ‘F’, Alberta and Newfoundland are considering legislation to strike the identifier from birth certificates, and a gender-neutral health card recently issued to a BC-born baby was allegedly the first of its kind.[1] In the wake of these reforms, the question posed in our previous article is more relevant than ever: will individuals withholding a sex identifier from their documents influence the accuracy of sex-based mortality tables used in the valuation of pension plans? How will financial management be affected if we can no longer depend on sex as an indicator of longevity?

Some argue that sex shouldn’t be considered when evaluating life expectancy at all. Historically, it was a good indicator of other lifestyle traits—men performed more physical labour, drank and smoked more regularly, and generally worked in higher-stress environments, all of which contributed to a shorter lifespan. Today, however, workplace climates, living conditions, and the personal habits of men and women are gradually converging, and research indicates the impact of sex on mortality is narrowing as well.[2] This shift bolsters the argument that lifestyle factors, not biological factors, are the more valid indicators of how long we live, and should be used to better manage longevity risk.

Critics maintain that, while lifestyle factors do contribute to overall mortality, they should be considered alongside sex and not instead of it. Sex-based mortality tables represent some of the most comprehensive and meticulously collected data we have about human populations worldwide. In Canada alone, the trend of women outliving men has been observed for nearly a century.[3] The strength of this statistic is difficult to ignore, especially in the absence of comparably robust data about lifestyle and personal habits.

In its inaugural study of defined benefit pensioner longevity, Club Vita Canada’s final report lists sex as one of the most effective factors for differentiating how long retirees live. Other major considerations include retirement health, socio-economic status (determined by postal code), and job type.[4] Contrary to popular assumption, whether a pensioner worked in the public or private sector is not significant. The report concludes that an amalgamation of factors will arguably produce the best predictions, but that sex should be among those factors.

For now, the merits of using sex-based mortality tables to manage longevity risk remain a subject of debate. Opponents of the practice point out that correlation is not causation, and life expectancy is not inherently sex-based; historical reasons for correlating sex and life expectancy largely don’t apply in modern settings, and better indicators now exist. Proponents of the practice maintain that the pension industry has consistently factored sex into mortality considerations without issue. The data is rigorous, the correlation is significant, and the calculations remain effective. They argue that developing a sex-neutral formula would require considerable time and resource commitment, and we shouldn’t be too quick to fix what doesn’t appear to be broken.

The effects of recent reforms won’t immediately be evident, and their impact on management and planning across Canadian sectors remains to be seen. By remaining fully informed in the meantime, we will be well prepared to respond to new issues as they arise and ensure the continued responsible fiscal management of our plans.


[1] “Canadian baby ‘first without gender designation’ on health card,” BBC News, July 3, 2017, http://www.bbc.com/news/world-us-canada-40480386.

[2] André Lebel and Stacey Hallman, “Mortality: Overview, 2012 and 2013,” Statistics Canada, July 12, 2017, https://www.statcan.gc.ca/pub/91-209-x/2017001/article/14793-eng.htm.

[3] “Life expectancy, 1920-1922 to 2009-2011,” Statistics Canada, March 3, 2017, http://www.statcan.gc.ca/pub/11-630-x/11-630-x2016002-eng.htm.

[4] “The future of Canadian longevity risk management: Key findings from 2016,” Club Vita Canada Inc., 2017.

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Factual snippets


Financial Literacy and Retirement Well-being

With the Canadian retirement landscape shifting toward self-directed retirement planning, it’s more important than ever to be financially literate. In 2013, 15 per cent of Canadians were age 65 or older; by 2030, this number is expected to increase to 25 per cent, and by 2056 there will likely be 50 seniors for every 100 working-age adults.

According to the Organisation for Economic Co-operation and Development (OECD), Canadian seniors do well compared to seniors in other developed countries. Canada has one of the lowest rates of seniors living below the poverty line, at 7.2 per cent, compared to an OECD average of 12.8 per cent. However, financial literacy research indicates Canadians struggle with some areas of personal financial management, such as knowing how much to save for retirement, managing a household budget and familiarity with useful financial products.

The 2014 Canadian Financial Capabilities Survey (CFCS) asked Canadians 14 questions about stocks, debt, inflation, interest rates, credit reports, risk and loans. The survey was used to inform two studies—one on gender differences and financial literacy, and the other on the link between financial literacy and retirement planning.

Gender differences and financial literacy, by Marie Drolet[1]

Drolet's study used the 2014 CFCS data to examine the gap in financial knowledge between men and women, and how these differences vary across socioeconomic characteristics such as age and education.

In general, men scored higher on financial literacy than women: 62.2 per cent vs. 58.6 per cent. Women also indicated less confidence in their financial skills.

A key metric used in the 2014 CFCS was the “five-question test,” a set of five questions relating to basic financial concepts such as interest, inflation and risk diversification. The number of men who answered all five questions correctly (21.5 per cent) was higher than the number of women who did so (14.7 per cent).

Age and education both influenced the relative performance of men vs. women on these five questions. In the 18-to-24 age range, women scored slightly higher than men (13.8 vs.12.4 per cent). But this shifts in the 25-to-34 age range where men start to score higher than women, with the gap growing significantly to 31.2 per cent for men vs. 15.6 percent for women in the 55-to-64 age range.

Furthermore, both men and women with a university degree were almost twice as likely as those with only a high school education to answer all five questions correctly.

A significant takeaway from the study is that people tend to overstate their financial knowledge: among the 43 per cent of men and 31 per cent of women who described themselves as financially knowledgeable, 1 in 4 men and 1 in 3 women scored less than 50 per cent on the 2014 CFCS.

Despite their overconfidence, 51.5 percent of women and 43.9 per cent of men who took part in the 2014 CFCS indicated they sought advice from a financial advisor when making financial decisions.

Financial literacy and retirement planning, by Sharanjit Uppal[2]

With the decline in workplace pension plans, private pension plans and personal savings will play an even more significant role in retirement income in the future—which means individuals will need to be even more knowledgeable about saving for retirement. Uppal’s study used the 2014 CFCS to examine the link between financial literacy and retirement preparedness of individuals aged 25 to 64 in the labour force. The study used two key retirement planning measures: are individuals preparing financially for retirement, and do individuals know how much to save for retirement?

In the 2014 CFCS, 77.8 per cent of participants stated they were preparing for retirement, down from 81 per cent from the 2009 CFCS. Even though people are preparing for retirement, only 45 per cent actually know how much they need to save for retirement. This number remained relatively unchanged from 2009 (45.6 per cent), but when you break this down by age those closest to retirement (age 55 – 64) saw a drop by almost 10 per cent.

Another interesting finding was that those who indicate they are preparing for retirement—or who have a pension plan—are twice as likely to know how much they need to save compared to those who are not preparing for retirement.

From a regional perspective, British Columbians were third most likely to know how much to save for retirement (45.7 per cent), but when it comes to preparing for retirement they were the second lowest in the country, with 76.1 per cent.

Overall, the study demonstrates that those who are preparing for retirement are more financially literate than those who are not preparing for retirement.


[1] Marie Drolet, Insights on Canadian Society – Gender differences in the financial knowledge of Canadians (Statistics Canada, 2016), http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=75-006-X201600114464&ObjType=47&lang=en&limit=0

[2]Sharanjit Uppal, Insights on Canadian Society – Financial literacy and retirement planning (Statistics Canada, 2016), http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=75-006-X201600114360&ObjType=47&lang=en&limit=0

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Stats-at-a-glance 


Dementia in Canada by the numbers[1]

According to the Public Health Agency of Canada (PHAC) dementia is “the loss of mental function affecting daily activities caused by brain diseases and brain injuries”. Alzheimer’s disease is one of the most common causes of dementia. Symptoms of dementia include

  • Memory loss
  • Judgement and reasoning problems
  • Changes in behaviour, mood and communication abilities

The PHAC states that dementia is not a normal part of aging.

The Canadian Chronic Disease Surveillance System collected data on dementia in people age 65 and older (statistics date from 2013–2014):

  • Of the over 402,000 Canadians who live with diagnosed dementia, two-thirds are women
  • The number of seniors living with dementia  is expected to increase by 21 per cent by 2024
  • Every hour, nine seniors are diagnosed with dementia
  • Your risk of being diagnosed with dementia after age 65 doubles every five years
  • Seniors diagnosed with dementia are 4 times more likely to die then other seniors

In British Columbia, the rate of dementia in those ages 65 and older is 1.4 per 100, just below the national rate of 1.5 per 100[2].

Low income seniors statistics by age, gender and economic family type[3]

Statistics Canada determines poverty statistics using the Organisation for Economic Co-operation and Development low income measure (LIM) after tax. The portion of seniors age 65 and over living below the LIM in the 70s was very high (33.1 per cent). This slowly declined to a low of 3.9 per cent in 1995, but has been gradually rising to a level of 14.3 per cent in 2015.

The portion of seniors in British Columbia living below the LIM is in line with national statistics—but differences can be seen when the average is broken down into different gender and economic family groups. Single seniors are significantly more likely to be living below the LIM then senior couples, with single males the most at risk

While many of today’s seniors are better off than their counterparts in the 70s, the number of seniors living below the LIM has trended upward since1995. This trend has many questioning the retirement readiness of Canadians, especially with the decline in access to workplace retirement pension plans.

Percentage of persons living below the LIM

 

1977

2015

 

Canada

British Columbia

Canada

British Columbia

Age 65 and older

33.1

33.3

14.3

14.1

Senior couples

23.2

22.8

7.7

6.8

Single males

50.6

52.0

29.8

36.8

Single females

59.9

60.4

33.0

31.0

 


[3]Statistics Canada, Table 206-0041: Low income statistics by age, sex and economic family type, Canada, provinces and selected census metropolitan areas, modified May 26, 2017, http://www5.statcan.gc.ca/cansim/a26?lang=eng&id=2060041

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