"Presently, the gap in CPP pensions between males and females is narrowing even if it is not expected to disappear completely."
Ottawa (5 November 2009) – The status of women within the Canadian pension system is not the same today as it was 30 or 40 years ago, according to the chief actuary of the Office of the Superintendent of Financial Institutions Canada.
Labour market participation for women has increased over the years, which has been the biggest factor in improving retirement security for women, Jean-Claude Ménard told the House of Commons Standing Committee on the Status of Women on November 3.
Labour force participation rates between male and female in Canada narrowed from 32 percent in 1976 to 10 per cent in 2006, and it is expected to narrow further but at slower pace. This trend correlates with registered pension plans (RPP) coverage. The proportion of female RPP members increased from 35 per cent, 20 years ago, to 49 per cent in 2007. In 2007, 2.9 million females participated in the RPP as compared to only 1.7 million in 1987. For all paid workers, the proportion of female RPP members is now higher than for men, a situation that had not been seen before 2005.
The gap in employment earnings between women and men has also narrowed over the last 40 years. The ratio of female to male average employment earnings stood at about 48 percent in 1966 and was 71 percent in 2006. It is expected that this ratio will further increase to 84 per cent by 2050. As a result of these trends, it could be expected that future generations of female retirees will have access to more adequate retirement income.
Ménard also noted that the gap in Canada Pension Plan (CPP) pensions between males and females is narrowing, even if it is not expected to disappear completely. He explained that some of the reasons for this are that “CPP contains several features that are designed to promote higher retirement income security for women. “
“The dropout provisions of the CPP, in particular the Child Rearing Dropout (CRDO) and the general low earnings dropout, allow for the exclusion of years with low earnings and help an individual to qualify for a larger pension.”
The Child Rearing Dropout provision was introduced in 1978 and it benefits individuals caring for young children, mainly women, who can then receive a higher pension. It allows the exclusion of low earnings while caring for children under age of seven from the benefit calculations. The general low earnings dropout supplements the child rearing dropout and also permits up to seven years or 15 per cent of a worker’s career to be dropped from the calculation of the pension.
“Virtually everyone benefits from this dropout provision; however the impact on women’s pensions is higher due to women’s lower earnings and more uneven work history,” noted Ménard.
Another feature of the CPP that mitigates the impact of low earnings on the calculation of pension amounts , according to Ménard, is that no contributions are taken from the first $3,500 of employment earnings (Year’s Basic Exemption). “The application of this provision provides a better return on contributions for lower earning individuals. Once again, even though this is a universal provision, women benefit more from it due to their generally lower earnings, as compared to men.”
He also mentioned life expectancy as another aspect that differentiates women from men. “Women are living longer than men. Therefore they are expected to receive their retirement income for a longer period of time. At the inception of the Canada Pension Plan in 1966, women aged 65 lived 17 years more on average. Today they are living for an additional 21 years after the age of 65, and are expected to live for 24 years in 2050. Indeed, generally women live about 3 years longer than men.”
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