Myth 5 – Expanding the CPP will help financially vulnerable seniors
Finally, Canadians worry about financially vulnerable seniors. Surely expanding the CPP will help them have a more comfortable retirement? Unfortunately, it will not.
To begin with, it is important to understand which group of seniors is most vulnerable. Statistics Canada’s “low income cut-off” is not an official measure of poverty but it does indicate whether someone is likely to experience difficult financial circumstances. The share of seniors living in low income based on this measure has fallen dramatically over the past four decades: from 29.0% in 1976 to 3.7% in 2013.
But some seniors are more susceptible. Specifically, single seniors living alone (widows, for example) are much more likely to be in low income than other seniors. In 2013, 10.5% of single seniors living alone were in low income, which is considerably higher than the rate for all seniors (3.7%). A subset of single seniors is at even higher risk of being in low income, namely single seniors living alone without any income from the CPP. Almost half of these single seniors (48.9 per cent) are in low income.
A CPP expansion would do little to help low-income single seniors partly because many have not worked outside the home in their working lives and thus have not earned any labour income—a key determinant of CPP retirement benefits. Those with no work history, and thus no contributions to the CPP, will receive no additional retirement benefits from an expanded CPP.
Even for low-income single seniors with work histories and sufficient contributions to the CPP, expanding the CPP may provide little or no net increase in their retirement income. That’s because a higher CPP benefit could simply result in a reduction in federal and provincial government benefits targeted at low-income seniors.
