1 PENSIONS,PRIVATIZATIONANDPOVERTY:THEGENDEREDIMPACT ClaireF.L.Young ProfessorofLaw FacultyofLaw UniversityofBritishColumbia 1822EastMall Vancouver V6T1Z1 Phone:6048224669 Fax:6048224781 young@law.ubc.

ubc.ca PLEASEDONOTCITEORQUOTEFROMTHISPAPERWITHOUTTHEAUTHORSPERMISSION INTRODUCTION Interestinpensionpolicyisextremelystrong,inpartbecauseofthedecliningvalueofmanypension fundsduetothe2007/8GlobalFinancialCrisis(GFC)andthecontinuinginstabilityofworldequity markets.1InCanada,forexample,theOntarioTeachersPensionPlan,oneofthelargestinthecountry, lost$19.5billionin20082andtheCanadaFederalPensionPlanlost$18.8billionbetweenJune2008and December2008.3TheOECDdeterminedthatCanadasprivatepensionfundssufferedreallossesof 21.4%in2008,atroublingstatisticgiventhatprivatepensionsplayakeyroleinensuringthatCanadians attainincomesecurityinretirement.4Oneresultoftheanxietysurroundingthedecliningvalueofpublic andprivatepensionplanshasbeenaproliferationofstudiesandreportsaboutretirementsavingsin
Forexample,theCreditSuisseGlobalInvestmentReturnsestimatedthatglobalstockmarketlossesbetween October2007andNovember2008totaledUS$21trillion,SusanThompson,Globalstockmarketlossestotal$21 trillionTheTimesOnline,(February11,2009)at http://business.timesonline.co.uk/tol/business/markets/article5705526.ece. 2 http://www.otpp.com/wps/wcm/connect/otpp_en/home/newsroom/news+releases/2009/diversification+strate gy+fails+to+avert+losses. 3 UnitedPressInternational,Canada'sfederalpensionplanloses$8.5B(February13,2009)at http://www.upi.com/Business_News/2009/02/13/Canadas_federal_pension_plan_loses_85B/UPI 39961234557652/. 4 See,http://www.oecd.org/dataoecd/41/3/44008042.pdf.AsIshalldiscuss,Canadiansareincreasinglybeing encouragedtosavefortheirretirementthroughprivatepensionplanssuchasRegisteredPensionPlans(RPPS)and RegisteredRetirementSavingsPlans(RRSPS)ratherthanrelyingonthepublicpensions,namelytheOldAge Security(OAS),GuaranteedIncomeSupplement(GIS)andCanada/QubecPensionPlan(C/QPP).
1

2 Canada.5ThesereportsreviewcurrentpensionpolicyinCanada(throughavarietyoflenses)and considerwhat,ifany,changesneedtobemade.In2010thefederalgovernmentestablishedapublic consultationaboutCanadasretirementincomesystem,invitingaresponsetoquestionssuchaswhat istheappropriateroleofgovernmentsinsupportingCanadianstoachieveadequateretirementincome anddoestheretirementincomesystemcurrentlyhavetheappropriatemixofpublicandprivate support.6 Myfocusinthisarticleisanissuethathasrarelysurfacedintheserecentdebates;thatisthedisparate impactofcurrentCanadianpensionpolicyonwomencomparedtomen.7Putsimply,whenone examinesstatisticsonincomesecurityinretirement,womenaredisproportionatelyworseofffinancially thanmen,withover72%ofthoseover65livingbelowtheLowIncomeCutOff(LICO),colloquiallycalled thepovertyline,beingwomen.8MyargumentisthatcurrentCanadianpensionpoliciesareamajor contributingfactortothisincomedisparity.Butthereasonstheydoarecomplexandrequire considerationofavarietyoffactorsincludingthesocioeconomicrealitiesofwomenslives,theimpact
Forexample,seeKeithAmbachtsheer,TheCanadaSupplementaryPensionPlan(CSPP):TowardsanAdequate, AffordablePensionforAllCanadians(C.DHoweInstituteMay2008)(hereinafterreferredtoastheC.D.Howe Report);JackMintz,SummaryReportonRetirementIncomeAdequacyResearch(ResearchWorkingGroupon RetirementIncomeAdequacyofFederalProvincialTerritiorialMinistersofFinance,December18,2009) (hereinafterreferredtoastheMintzReport);ReportoftheStandingCommitteeontheStatusofWomen(Chair HedyFry),PensionSecurityforWomen(Ottawa,December2009)(hereinafterreferredtoastheFryCommittee Report);andMonicaTownson,OptionsforPensionReform:ExpandingtheCanadaPensionPlan(CanadianCentre forPolicyAlternatives,April2010)(hereinafterreferredtoastheTownsonReport). 6 EnsuringtheOngoingStrengthofCanadasRetirementIncomeSystem(DepartmentofFinance,March24,2010) athttp://www.fin.gc.ca/activty/consult/retirementeng.asp#background. 7 Therearetwonotableexceptionstothisstatement.First,theFryReport,supranote5,madeavarietyof recommendationsdesignedtoimprovepensionpoliciesforwomen.Secondly,MonicaTownsonhasconsistently takengenderintoaccountinherwork.Seeforexample,MonicaTownson,IndependentMeans:ACanadian Woman'sGuidetoPensionsandaSecureFinancialFuture(1997,McMillanCanada),MonicaTownson,Reducing PovertyamongOlderWomen:ThePotentialofRetirementIncomesPolicies,(Ottawa:StatusofWomenCanada, 2000),MonicaTownson,AReportCardonWomenandPoverty(April2000)CanadianCentreforPolicyAlternatives athttp://www.policyalternatives.ca/documents/National_Office_Pubs/women_poverty.pdfandMonicaTownson, PensionsUnderAttack:What'sBehindthePushtoPrivatizePublicPensions(Ottawa:CanadianCentreforPolicy Alternatives,2001). 8 IncomeinCanada,2006,StatisticsCanada(2008)http://dsppsd.pwgsc.gc.ca/collection_2008/statcan/75202 X/75202XIE2006000.pdf.
5

3 onwomenofusingtaxexpenditurestoencourageustosaveforretirementandCanadianpension policies.ThetrendinCanadaistoencourageindividualstosavefortheirretirementthroughprivate pensionsratherthanbolsteringthemorepublicpensionssuchastheOAS,GISandCPP.Before reviewingandcritiquingCanadianpensionpolicyanditsimpactonwomen,itisimportanttolocatethe debatesinthecurrentsocioeconomicrealitiesofwomenslivesandtheongoingtrendtoplace responsibilityfortheeconomicsecurityofretiredCanadiansontheprivatesector. SocioEconomicRealitiesofWomensLives Thesocioeconomicrealitiesofwomenslivesarecomplexandvaried.Womentendtoearnlessthan menandbelesswealthythanmen.Forexample,thelatestfiguresshowthatwomenearn71centsfor everydollarearnedbymenforfulltimefullyearworkand65centsforeverydollarearnedbymenfor parttimework.9Moreover,notallwomenaresituatedequallywithinthesecomparativefigures. Womenofcolour,aboriginalwomenandwomenwithdisabilitiesearnlessthanotherwomen.10Even thoughmorewomenthaneverareparticipatinginthepaidlabourforce,manyofthemareemployed onaparttimebasisandindeedwomenhaveconsistentlyformedapproximately70%oftheparttime labourforcesincethe1970s.11Morewomenarelivingaloneandfewerwomenarelivinginrelationships withmen.12Womenarelivinglongerthanmenandithasbeenestimatedthattheyneed8to10%more financialresourcesthanmentomaintaintheirsamestandardoflivinginretirement.13Asalready mentioned,over72%ofthose65orolderlivingbelowthepovertylinearewomen.Itisalsoimportant tonotethatsingleelderlywomenarethepoorestofthepoorinCanada,with80%ofunattached
http://www40.statcan.gc.ca/l01/cst01/labor01beng.htm.Thereare,ofcourse,exceptionstothisgeneral statementwithaboriginalmen,forexample,earninglessthanmanywomen. 10 DeborahStienstra,WomenandRestructuringinCanada(CanadianResearchInstitutefortheAdvancementof Women,2010)at4. 11 Ibid.at3 12 StatisticsCanada,PopulationbyMaritalStatusandSex,2007athttp://www40.statcan.gc.ca/l01/cst01/famil01 eng.htm. 13 FryReport,supranote5at7.
9

4 womenover65livinginpoverty.14AsIshalldiscuss,womenslowerincomescomparedtothoseofmen areamajorreasonthatcurrentpensionpoliciesdonotbenefitthemtothesameextentasmen.There areofcourse,somewomenwhoearnmorethanmen,butoverallwomenhavelowerincomeswhichin turnleadtoloweramountscontributedtopensionplansandlowerpensionsinretirement.Whileone mightassumethatwomenseconomicinsecurityinretirementmightbeduetopastinequitiesinthe pensionsystemandthatthesituationwouldnowbeimprovingbecausemorewomenareparticipating inthelabourforceandthereforemayhaveaccesstoworkplacepensionplans,suchanassumption wouldbeincorrect.Statisticsshowthatwhileelderlymensincomehasbeenslowlyincreasing,thatof womenhasdecreasedslightly.15 ThePrivatizationAgenda Oneofthecornerstonesofneoliberalismandindeedneoconservatismisapreferenceforrelianceon theprivatesector,whetheritistheprivatemarketorprivatefamily,ratherthanthestate,toprovidefor thewelfareofcitizens.AsLisaPhilippshassaid,thedrivetowardsprivatizationinCanadahasatits heartonecentralclaim:thatprivatechoiceisbetterthanpublicregulationasamechanismfor allocatingresourcesandorderingsocialaffairs.16IshallarguethatCanadianpensionpolicyis increasinglymovingawayfromitspublicrootstowardsasystemthatplacesincreasingemphasison pensionsprovidedbytheprivatesector.Theseprivatepensionsincludeworkplacepensionplans, knownasRegisteredPensionPlans(RPPs),andpersonalpensionplans,suchasRegisteredRetirement PensionPlans(RRSPs).InthecaseoftheRPP,itistheemployer,notthestate,thatmustestablishthe
Ibid.at3. FiguresforIncomebyFamilyTypeinCanadafor2008showthatnonearningelderlymalessawanincreasein theirincomefrom$22,000to$24,200fortheperiod2006to2008whilenonearningelderlyfemalessawadropin theirincomefrom$21,300to$20,900duringthesameperiod,seeStatisticsCanadaat http://www.statcan.gc.ca/bsolc/olccel/olccel?catno=75202x&lang=eng. 16 LisaPhilipps,TaxLawandSocialReproduction:TheGenderofFiscalPolicyinanAgeofPrivatizationinBrenda CossmanandJudyFudgeeds.,Privatization,LawandtheChallengetoFeminism(UniversityofTorontoPress, 2002)at41.
15 14

5 planandmakecontributionsonbehalfoftheemployee.Itistheemployerschoicewhethertosetup theplanornot.InthecaseoftheRRSPitisuptoprivateindividualstoestablishtheirownplanand choosetomakecontributionstoit.Boththesepensionsaredependentontheprivatemarketwith respecttotherateofreturnonthecontributionsandthegenerationofincomebythosecontributions toprovideanadequatepension.Eventhough,asIshalldiscuss,taxexpendituresareusedtoencourage taxpayerstocontributetotheseplans,thereisnostateresponsibilityforensuringthatthesepensions provideadequatefundsforthemembersoftheplanintheirretirement.Furthermore,asIshalldiscuss, boththeseplansinvolverisksthatarebornebytheprivateindividual,includingforexample,riskwith respecttothefundsintheplan. CANADIANPENSIONS TheCanadianpensionsystemhasbeendescribedasapyramid.17AtitsbaseistheOldAgeSecurity (OAS),aflatratemonthlyamountpaidtothoseover65,supplementedbytheGuaranteedIncome Supplement(GIS)forthosewhoneedit.ThenextlevelistheCanadaPensionPlan(CPP)andtheQubec PensionPlan(QPP),bothfundedbypayrolldeductionsandintendedtoprovideretirementincometo thosewhohaveparticipatedinthepaidlabourforce.Attheapexofthepyramid,arethetwoprivate pensionplans,bothheavilysubsidisedbythetaxsystem,theRPPandtheRRSP. PublicPensions OAS,GISandtheCPParereferredtoaspublicpensions,inpartbecausetheOASandGISareuniversal andtheCPPisamandatoryplanforthoseparticipatinginthepaidlabourforce.18For2010the
MaureenDonnelly,TheDisparateImpactofPensionReformonWomen(1993)6CanadianJournalofWomen andtheLaw419at419.Ithasalsobeendescribedasconsistingofthreepillarsthatbalancepublicandprivate responsibility,MintzReport,supranote5at3. 18 SeeC.DHoweReportat2andtheMintzReportat4,supranote5.Bothpensionsarealsoregulatedbyfederal legislation.
17

6 maximumannualOASbenefitis$6,222withanaveragebenefitof$5,869.19ThemaximumGISpayment forasinglepersonis$7,853withanaveragepaymentof$5,357.20Bothpensionsaresubjecttoaclaw backwiththeOASclawbackstartingwhenincomereaches$66,733andtheGISonlybeingavailableto thosewithincomeslessthan$15,720.WhatisimportanttonoteisthatthosewhorelysolelyonOAS andGISinretirementreceiveamaximumamountofapproximately$14,000ayear,anamountthatis significantlybelowtheLowIncomeCutOff.ThebeforetaxLICOforanindividuallivinginalarge metropolitanarea(apopulationofover500,000)is$22,229andthefigureforaruralarea(apopulation lessthan30,000)is$15,302.21Thus,thosewhorelysolelyonthesepensionsfortheirincomesecurityin retirementliveinpovertyandwomenconstitutealmost60%ofOASrecipientsand63%ofGIS recipients.22 TheC/QPPisamandatorycontributorypensionplanthatprovidesretirementincomeupto25%of lifetimecontributoryearnings.For2010themaximumannualretirementbenefitatage65is$11,210 whiletheaverageamountis$6,061.23WhiletheCPPisviewedbysomeasagoodplanforwomen,in partbecauseittakeswomensworkpatternsintoaccountbyallowingwomenwithchildrenunderseven yearsofagetotaketimeoutofthelabourforcewithoutalossofbenefits,itisnotideal.First,women whochoosetoworkinthehomeandnotinthepaidlabourforcearenoteligibletoreceivethepension intheirownright.24Secondly,eventhoughthenumbersofmenandwomenreceivingtheCPPare almostequal,womenreceiveconsiderablylessinamountthanmen,withanaveragemonthlypayment

http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml. Ibid. 21 http://www.statcan.gc.ca/pub/75f0002m/2010005/tbl/tbl02eng.htm. 22 SeeFryCommitteeReport,supranote5at13. 23 http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/rates.shtml. 24 ItshouldbenotedthatwhilethesewomencanreceiveasurvivorbenefitondeathoftheirspouseorCPPcredit splittingonseparationordivorce,thereisnoindividualentitlementtothepension.

20 19

7 of$409forwomenand$582formen,adifferenceofalmost$2,100ayear.25IndeedtheFryCommittee estimatesthatbytheyear2050womenwillstillonlyreceiveapproximately80%ofthepensionreceived bymen.26TheFryCommitteenotesthatthepredominantreasonforthelowerpaymentsisthatwomen earnlessthanmen.27Whilewomendoearnlessthanmenoverall,28thereisacapontheamountthat onecancontributetoCPP,whichmeansthatnocontributionscanbemadeonceonesincomereaches approximately$46,000.Thereforewomenslowearningsincomparisontomendonottotallyexplain thediscrepancy.Otherfactorssuchasworkpatternsthatinvolvetimeoutofthelabourforcetocarefor olderchildrenand,increasingly,elderlyrelatives,playarole.Whilethereisalimiteddropout provisionthatallowscontributorstoexcludeupto17%ofmonthsoflowornilincomeovertheir lifetimefromthepensionformula,thisprovisionisoflimitedbenefittothosewomenwhoassume extendedcaregivingresponsibilitiesforfamilymembers,suchastheelderly.29 TheaverageamountreceivedinCanadaasOASandCPPbyanindividualisapproximately$16,000with amaximumofapproximately$19,000,amountsthatleavetherecipientswithincomebelowtheLICOin ametropolitanarea.Consequently,recoursetoprivatepensionplansandprivatesavingstoprovide incomesecurityinretirementisessentialinordertoliveabovethepovertyline.Yet,eventhough womenreceivelessofthepublicpensionsthanmen,asnotedearlier,theyrelyonthemmorethanmen fortheirfinancialwellbeinginretirement.Akeyquestionis,whatthenshouldthebalancebebetween thepublicandprivateresponsibilityfortheeconomicwellbeingofelderlyCanadians?CurrentlyCanada reliesmoreextensivelythanmostOECDcountriesonprivatepensionsandprivatesavingsthanthe
SeetheFryCommitteeReport,supranote5at17. Ibid. 27 Ibid. 28 Supranote9. 29 InresponsetothisproblemtheFryCommitteerecommendedthatthegovernmentexplorethe implementationofacaregiverdropoutforCanadianswhoreducetheirlabourforceattachmenttocareforsick, disabledorelderlypersonsrequiringcare,comparabletothecurrentchildrearingdropout,supranote5, Recommendation4at35.
26 25

8 publicarmofthepensionsystemtoprovideretirementincomeforitscitizens.30InCanadaprivate pensionsandotherinvestmentsprovide41%ofretirementincomescomparedto20%onaverageinthe OECDcountries.31Givenwomensrelianceonpublicpensionsandtheirlackofaccesstoandlower pensionsreceivedfromprivatepensionssuchasRPPsandRRSPs,Canadaneedstobolsteritspublic pillarofthepensionsystem. PrivatePensionsandtheTaxSystem Incometaxlawisoneofthemostimportantpoliticaltoolsthatagovernmenthasatitsdisposal.Tax lawsareusedtodirecteconomicandsocialbehaviorinamyriadofways.Manyofthemostimportant measuresusedtoachievesocialpolicygoalsaretaxexpendituresandtheseexpendituresarethekey incentiveusedtoencourageCanadianstosavefortheirretirement.Taxexpendituresaredefinedasany deviationfromthebenchmarkpersonalincometaxstructure.Theyincludemeasuressuchasdeductions inthecomputationofincome,taxcredits,exemptionsfromtaxanddeferraloftaxpayable.Eachyear thefederalgovernmentpublishesalistofthevalueofalltaxexpenditures.32Taxexpendituresarethe functionalequivalentofdirectgovernmentexpenditures,withonemaindifference:insteadofbeing deliveredasadirectgranttoanindividual,taxexpendituresaredeliveredbythetaxsystem.The distinctionissignificant.Whiletheimpactoftechnicaltaxprovisionstendstobeevaluatedbyreference tocriteriasuchashorizontalandverticalequity,neutralityandsimplicity,differentcriteriaareapplied taxexpenditures.AstheLawCommissionofCanadahassaid:Couldtheobjectivebebetterserved throughtheuseofsomeothergovernmentpolicyinstrument?.33TothisquestionIwouldanother,is

PensionsataGlance:RetirementIncomeSystemsinOECDCountries,(OECD,2009)at http://www.oecd.org/dataoecd/41/3/44008042.pdf. 31 Ibid.at1. 32 See,TaxExpendituresandEvaluations,2009(Ottawa,DepartmentofFinance)http://www.fin.gc.ca/taxexp depfisc/2009/taxexp09eng.asp. 33 LawCommissionofCanada,BeyondConjugality:RecognizingandSupportingClosePersonalandAdult Relationships(Ottawa,2001)at65.

30

9 themeasurefairordoesitdiscriminateinaninappropriatemanneragainstsometaxpayersandin favourofothers?Inthepensioncontext,taxexpendituresareusedtoencourageemployerstoestablish andcontributetopensionplansandemployeestomakecontributionstothoseplans.Theyarealsoused toencourageindividualstoestablishpersonalpensionplans(RRSPs)and,inthecaseofthoseinspousal relationships,tosetupaRRSPinthenameoftheirspouse.AsIdiscusslaterinthisarticle,womenhave unequalaccesstotheseexpenditurescomparedtomenforavarietyorreasons. RegisteredPensionPlans ThetaxsubsidizationofRPPsistwofoldinnature.First,employersandemployeeswhocontributetoa RPParepermitted,subjecttolimitsastoamount,todeductthosecontributionsinthecomputationof theirincome.34Forexample,ataxpayerwhopaystaxatanaveragerateof30%andcontributes$10,000 toaRPPwillsave$3,000intaxesowingintheyearofcontribution.Secondly,theincomeearnedbythe fundsintheRPPisnottaxable.Thesemeasuresresultinadeferraloftaxbecausethecontributionis madewithpretaxdollarsandtheresultingincomeisonlytaxedonceitisremovedfromtheplanor receivedasapension.Ifthatmoneyhadbeeninvestedinanontaxshelteredaccount,taxwouldhave beenpayableontheincomeasitaccumulatedannually.Thevalueofnontaxationofincomeearnedina RPPresultsinasignificanttaxsavingovertheyears.Furthermore,itisverylikelythatwhenthefunds arewithdrawnfromtheRPPasapension,theindividualwillpaytaxatalowermarginaleffectivetax ratethansheorhewouldhavepaidtaxhadtheincomebenntaxedasitaccumulated.Thereasonis thatonesincomeinretirementisoftenlessthanitwasatthetimethecontributionwasmade, resultinginalowermarginaleffectivetaxrateonthatincome.For2009(latestfiguresavailable),the

34

IncomeTaxAct,R.S.C.1985,c.1(5thSupp.),sections147.2and149(1)(o.1)(hereinafterreferredtoastheITA).

10 valueofthedeductionforcontributionstoprivateRPPsandtheshelteringofincomeintheplansis estimatedtobeover$18billion.35 RegisteredRetirementSavingsPlans RRSPsaresubjecttosimilartaxrulesasRPPswithadeductionforcontributionstotheplan,subjecttoa limitonamount,andtheshelteringofallincomegeneratedintheRRSPfromtax.AswithRPPs,thereis adeferraloftaxuntilthefundsareremovedfromtheplanwiththeadvantagesdescribedabove.An individualisalsopermittedtocontributetoanRRSPintheirspousesname.36Thecontributionmaynot exceedtheindividualsowncontributionlimit,lessanyamountcontributedtotheindividualsownplan. Theadvantageofcontributingtoaspousalplan,ratherthanonesownplan,isthattheindividualis providingfutureretirementincomefortheirspouseandisalsosplittingincomewiththatspouse.In otherwords,incomethatwouldhavebeentaxedintheindividualshandsonrealizationwillbetaxedin thehandsofthespouse,whomaywellpaytaxatalowermarginaleffectivetaxratethantheindividual byreasonoftheirlowerincome.ThegeneralpolicyunderlyingspousalRRSPsistopermitindividualsto provideretirementincomefortheirspouseswhoareunabletocontributetoaRPPorRRSPontheir ownbehalf.ThespousalRRSPisagenderedtaxbreakinthatitisusedprimarilybymentoestablish RRSPsfortheirfemalespouses.37For2009,thevalueofthetaxexpenditureforcontributionstoRRSPs andtheshelteringofincomefromtaxisestimatedtobe$13billion. OtherTaxSubsidiesRelatedtoIncomeSecurityinRetirement

Supra,note32at17. Supra,note34atsection146.ForthepurposesoftheITA,spouseincludespersonsmarriedtoeachotherand commonlawpartnerslivinginaconjugalrelationshipforatleast12months(section248(1). 37 Thereare,ofcourse,exceptionstothisstatement,suchasalesbianwithahighincomecontributingtoaspousal RRSPforherpartnerwhoistakingtimeoutofthepaidlabourforcetoraisetheirchildren.

36 35

11 In2007thefederalgovernmentintroducedrulesthatallowspousestosplitpensionincomeon retirement.38Thevalueofthisexpenditureisestimatedtobe$730millionforthe2009taxationyear.39 Thebenefittothecoupleinwhichonespousehasahighincomeandtheotherlittleornoincomeis significant.Giventhefactthatwomentendtoearnlessthanmenandhavelesscapitalandwealththan men,thecouplethatwilltypicallybenefitisaheterosexualcouplewithafemalespousewhodoesnot workoutsidethehomeandhasnotbeenabletocontributetoapensionplan.TheDepartmentof Financeestimatedthatthetaxsavingtoacoupleinwhichonespousehaspensionincomeof$100,000 andtheothernoincomewouldbeapproximately$7,300.40 Morerecentlyin2009,thefederalgovernmentintroducedtheTaxFreeSavingsAccount(TFSA).41While thismeasureisnotlimitedtoretirementsavings,itwillplayaroleinallowingindividualstosavefor theirretirementinataxeffectivemanner.Anindividualisentitledtocontributeupto$5,000ayeartoa TFSAandtheincomeearnedbythecontributionsaccumulatesonataxfreebasis.UnlikeRPPsand RRSPs,thereisnodeductionforthecontributiontoaTFSA.Theshelteringfromtaxofallincomeearned bytheplanmeansthattotheextentataxpayerhasthediscretionaryfundstoinvest,sheorhewould usetheshelteroftheTFSAbeforeinvestinginanontaxpreferredplan.Furthermore,onecanwithdraw fundsfromaTFSAatanytimewithouttaxliabilityandifonemakesawithdrawal,thewithdrawn 38 Section60.03oftheITApermitsthesplittingofpensionincome.GiventhatthetaxunitinCanadaisthe
individualandwedonotpermitspousestofilejointreturns,permittingthesplittingofpensionincomeis somewhatoutofstepwiththatpolicy.Indeed,Isuggestthatinthisneoconservativeerawithitsfocusonthe family,theintegrityoftheindividualasthetaxunitisundersiegeanditispossiblethatthefederalgovernment willmovetowardspermittingspousestoincomesplitalltheirincome.Suchameasurewouldbeespecially regressiveinitsimpactbecauseitwouldfavourthosecouplesinwhichonespousedidnotworkoutsidethehome overthosecouplesinwhicheachspousehasarelativelyequalincome.TheCBCreportedin2006thatFinance MinisterJamesFlahertyhasalsoconfirmedthattheHarpergovernmentismusingaboutextendingincome splittingtoallcouplesnotjustseniors.ThiswouldmarkamajordeparturefromcurrentCanadiantaxpolicy. See,http://www.cbc.ca/news/background/personalfinance/incomesplitting.html. 39 Supra,note32. 40 FrancesWoolley,PolicyForum:LiabilityWithoutControlTheCuriousCaseofPensionIncomeSplitting(2007) CanadianTaxJournal603. 41 Supra,note34,atsection207.01.

12 amountcanbereplacedintheTFSAinafutureyear.ThefederalgovernmentrecognizesthataTFSAcan bearetirementplanningvehicle,statingtheTFSAcomplementsexistingregisteredsavingsplanslike theRegisteredRetirementSavingsPlans(RRSP).42UnliketheRRSP,whichisataxdeferredscheme,the TFSAisataxprepaidscheme.Thatis,thewhiletheRRSPcontributionisdeductibleintheyearitis made,thereisnodeductionfortheTFSAcontribution.Furthermore,becausetheTFSAisataxprepaid schemeitbenefitsataxpayerwhoexpectstheirmarginaleffectivetaxratetobehigherwhenthey withdrawthefundsthanitwaswhentheymadethecontribution.Therearenofigurescurrently availabledetailingthegenderbreakdownintermsofwhobenefitsfromthetaxbreakforTFSAs, althoughonecanspeculatethatbecausewomentendtohavelowerincomesthanmen,theymaynot haveasmuchdiscretionaryincometocontribute. THEGENDEREDIMPACTOFCANADIANPENSIONPOLICIES GiventhatCanadiansarespendingover$31billionontaxbreaksforcontributionstoRPPsandRRSPs,it isvitallyimportantthatthesetaxsubsidiesareallocatedinafairandequitablemanner.Toputthe mammothsizeofthesubsidyincontext,ithasbeenestimatedthattheamountspentontaxsubsidies forprivatepensionplansin2010willexceedtheamountspentdirectlyonOASforthe20092010fiscal year.43Thereareseveralproblemswiththisstateofaffairs.First,asnotedearlier,womenrelymoreon thepublicpensionssuchasOASfortheireconomicsecurityinretirementthanmen,andyetthe governmentisdevotinglessmoneytothispillarofthepensionsystem.Secondly,taxsubsidiesareonly availabletothosewhopaytax,soasignificantnumberofCanadians,especiallywomenwiththeirlower

See,DepartmentofFinance,TaxFreeSavingsAccountathttp://www.tfsa.gc.ca/. See,theTownsonreport,supranote5at1.MonicaTownsonnotesthatthenetcosttothefederalgovernment oftaxsubsidiesforRPPsandRRSPsisprojectedtobe$29billionin2010.Thenetcostisthecostoflosttax revenuesfromthedeductionforcontributionstotheplansandtheshelteringofincomeintheplansfromtaxless taxrevenuesgeneratedbytaxingwithdrawalsfromtheplans.IncontrastthecostofOASbenefitsisestimatedto be$27.6billion.

43 42

13 incomes,areunabletoaccessanyofthe$31billionspentonthesubsidies.44Thirdly,thetaxsubsidies forRPPsandRRSPsareworthmoreintermsoftaxessavedtothosewithhigherincomesthanthose withlowerincomes.OnereasonisthenatureofthetaxsubsidyforcontributionstoRPPsandRRSPs.A taxdeductionisworthmoreintermsoftaxessavedtoataxpayerpayingtaxatahighermarginal effectivetaxratethantosomeonewhopaystaxatalowermarginaleffectivetaxrate.Forexample, assumethatBobandCaroleachcontribute$10,000toaRRSP.Bobhasahigherincomeandpaystaxat anaveragerateof40%whileCarolhasalowerincomeandpaystaxatanaveragerateof20%.Bobwill save$4,000intaxesotherwisepayable,whileCarolwillonlysave$2,000,eventhoughtheyboth contributedthesameamounttotheRRSP.Giventhatwomentendtoearnlessthanmentheyare receivinglessofthetaxsubsidy. RPPS Atagenerallevel,themajorproblemforwomenhasbeenlackofaccesstoworkplacepensionplans. Only38%ofworkersinCanadahaveaworkplacepensionplan,afigurethathasdroppedfrom45%in 199245andthatdeclineisexpectedtocontinue.46Formanywomenthenatureoftheworkthey perform,suchasparttimelabourandnonunionizedworkhas,inthepast,meantthattheywere excludedfromtheseplans.Whilewomensmembershipintheseplanshasbeenincreasingoverthe years,itstilllagsslightlybehindmen.In200552.5%ofmenand47.5%ofwomenbelongedtoworkplace pensionplansandin2009thefigureswere50.9%ofmenand49.1%ofwomen.47Whiletherehasbeen someimprovementforwomenintermsofaccesstotheseplans,weneedtobecautiousaboutits
Whilemorewomenthanmenfiledtaxreturnsin2008(12,506,340womencomparedto11,661,270men),the totalnumberoftaxablereturnswas8,678,310formenandonly7,797,640forwomen.See,CanadaRevenue Agency,IncomeStatistics20102008TaxYear,InterimTable4Universedataathttp://www.cra arc.gc.ca/gncy/stts/gb08/pst/ntrm/tblseng.html. 45 See,theTownsonReport,supranote5at2. 46 C.D.HoweReportat5andFryCommitteeReportat25,supranote5. 47 See,StatisticsCanada,RegisteredPensionPlan(RPP)Members,byAreaofEmployment,SectorandTypeofPlan (Canada)athttp://www40.statcan.gc.ca/l01/cst01/famil120aeng.htm.
44

14 significance.TheFryCommitteehasnotedthatevenbytheyear2022,only33%ofwomenwillhave contributedtoaworkplacepensionplanfor15yearscomparedto36%ofmen.48 Asecondaspecttothisissueisthenatureoftheworkplacepensionplansthatmaybeprovidedby employers.ThetwomaintypesareDefinedBenefitPlans(DBPs)andDefinedContributionPlans(DCPs). ADBPisaplanbasedonaformulathattakesintoaccountserviceandearningsandthenprovidesaflat benefitbasedonthesefactors.TheemployeewithaDBPreceivesafixedandpredictablepensionbased ontheformula,regardlessoftherateofreturnenjoyedbytheinvestmentsintheplan.ADCPisa capitalaccumulationplan.Employerandemployeecontributionsareputintoafundthatprovidesa lumpsumtobedrawnoutorconvertedintoanannuityonretirement.Typically,theemployeeisgiven optionswithintheplanabouthowthecontributionsareinvested,althoughthoseoptionsvaryfrom plantoplan.Themaindifferencebetweenthetwotypesofplansisrelatedtowhobearstheriskwith respecttotheplansinvestmentsandtheirrateofreturn.49InthecaseoftheDBPitistheemployer whobearsthatriskandinthecaseoftheDCPitistheemployee.Thenatureoftheriskbornebyan employeewithaDCPiscomplex.First,unlikeaDBP,thereisnosafetynetfortheindividualifthevalue oftheinvestmentsdeclines.50Theemployerhasnoresponsibilitytomaintainadequatefundsintheplan tomeetfuturepensionliabilities.Secondly,responsibilityforthemannerinwhichthefundsintheDCP areinvestedwhileintheplanispartiallybornebytheemployee.Whiletheemployeradministersthe planandofferstheemployeearangeofinvestmentoptionswithrespecttothefundsintheplan,itis theemployeewhochooseswhichofthoseoptionstouse.Thirdly,oncetheemployeeretires,thereare
FryCommitteeReport,supranote5at26. Foranexcellentanalysisoftheissueofriskandworkplacepensionplans,seeMaryCondon,PrivatizingPension Risk:Gender,LawandFinancialMarketsinBrendaCossmanandJudyFudgeeds.,Privatization,Lawandthe ChallengetoFeminism(UniversityofTorontoPress,2002),supranote16at128165. 50 WhiletherearestrictrulesrequiringDBPstomakeupanyshortfallintheplan,itisofcoursepossiblethata privateemployerprovidingaDBPcouldgobankrupt,therebyaffectingtheabilityofemployeestocollecttheirfull pension.DespitesomehighprofileinstancesofthisproblemwithNortelbeingoneexample,theDominionBond RatingServicereviewed70DBPsafterthe2008GFCandconcludedthatmostweresolvent.SeeMintzReport, supranote5at24.
49 48

15 moredecisionstobemadeabouthowtoinvestthepoolofcapitalthatisbeingusedtoprovide retirementincome.WhiletheGFChaswreakedhavocwiththevalueofprivatepensionplans generally,51onecanspeculatethattherelativelyuniformedandunsophisticatedinvestorwillhave sufferedgreaterlossesthantheexpert.52AstheFryCommitteenoted,Witnessessuggestedthat makinginformedinvestmentdecisionsiscomplicated.Theyhavepointedoutthat,whileCanadiansin definedbenefitplansarelargelysparedfrommakingcomplexinvestmentdecisionsabouttheirsavings, thosewhorelyonprivatesavingsrequiremuchmoresophisticatedknowledgetomakeinformed decisionsandmanagerisk.53 ThenumberofDBPsisdeclininginCanada,withnewplanstendingtobeDCPsandemployers convertingcurrentDBPstoDCPs.Thischangeisoftenframedinneoliberalprivatizationtermsasbeing allaboutcontrolandchoicefortheindividual;thatisonecancontrolonesownpensionfundsand makechoicesabouthowthosefundsareinvested.54TheFryCommitteeReportnotesthatDBP coveragehasdeclinedfrom43.5%in1979to30.6%in2006.55Thischangeisparticularlyproblematic forwomen.ThemainreasonisthatDBPstendtobeofferedbypublicsectoremployersratherthan thoseintheprivatesector.Ithasbeenestimatedthatonly20%ofprivatesectorworkershaveDBPs.56 Butthenumberofwomenworkinginthepublicsectorhasincreasedovertheyearsgoingfrom46%in 1992,to56%in2008.57ThusanydeclineinthenumberofDBPsinthepublicsectorhasaparticularly adverseimpactonwomen.Theresponsibilityfortheriskwithrespecttothefundsintheseplanswillbe

Supra,note4. TheMintzReportsuggeststhatindividualinvestorstendtomakemistakesandusepoorinvestmentstrategies whichcancostthemincomparisontoprofessionalinvestors,supranote5at18. 53 FryCommitteeReport,supranote5at22. 54 See,forexample,MaryCondon,supranote49at151. 55 Ibid.at25. 56 C.D.HoweReport,supranote5at6. 57 CanadianHumanRightsCommission,ImpactoftheEmploymentEquityActandtheCHRCEmploymentEquity ProgramOvertheYearsathttp://www.chrcccdp.ca/publications/eeprogram_programmeee/page1en.asp.

52 51

16 placedonwomensshoulders,aswellastheresponsibilitytobecomeknowledgeableaboutwhat choicestheyshouldmakeabouttheirinvestments. RRSPs RRSPswereintroducedinMarch1957andintendedtoassistthosewithoutaccesstoworkplacepension planstosavefortheirretirement.Onintroductionthemaximumcontributionwasthelesserof10%of earnedincomeor$2,500lessanypensionadjustment.For2010,themaximumcontributionisthelesser of18%ofearnedincomeand$22,000lessanypensionadjustment.58Asalreadymentioned,the projectedcosttothefederalgovernmentofthetaxreliefgivenbythedeductionofcontributionsfrom incomeandtheshelteringofincomeintheplansis$18billion.AsIshalldemonstrate,womendonot benefittothesameextentasmenfromthistaxsubsidy,withtheresultthattheyhavelessmoneyin theirRRSPs,afactorthatleadstothemlivingingreaterpovertythanmenintheirretirementyears.As theWomenandTaxationWorkingGroupoftheOntarioFairTaxCommissionnoted,[t]hecurrent systemoftaxassistedsavingsforretirementresultsinsystemicdiscriminationagainstwomen,asthe benefitsaredisproportionatelyenjoyedbymen.59 InordertobenefitfromthetaxbreaksassociatedwithRRSPs,onemusthavefundswithwhichtomake acontribution.Giventhatwomenearnconsiderablylessthanmen,60theytendtohaveless discretionaryincometocontributetoaRRSP.Thisfactisevidentwhenonereviewsthestatisticsonwho contributestoaRRSPandhowmuchtheycontribute.Forexample,inthe2008taxationyear(latest

Supranote34,section146(1).Ataxpayerspensionadjustment(definedintheRegulationstotheITA)takesinto accountanycontributionstoaRPPwiththeresultthatthemoreoneputsintoaRPP,thelessonecancontribute toaRRSP. 59 OntarioFairTaxCommission,WomenandTaxWorkingGroup,WomenandTaxation(1992,OntarioFairTax Commission)at22. 60 Supra,note9.

58

17 figuresavailable)3,297,330menand2,869,820womencontributedtoaRRSP.61Whilethereisnota hugedifferenceinthenumbersofmenandwomencontributing,thereiscauseforconcernwhenone looksattheamountcontributedbymenandwomen.Inthatyearmencontributed$20,240,109while womenonlycontributed$12,676,281.62Notsurprisinglythosewithhigherincomescontributed considerablymorethatthosewithlowerincomes.Forexample,taxpayerswithincomesofmorethan $50,000contributedonaverageabout$7,500each,whilethosewithincomesof$20,000to$25,000 onlycontributedapproximately$1,800each.63Theloweramountscontributedbywomenmeanthat theyarereceivingconsiderablylessofthe$18billiontaxsubsidythanmen.Thereisanotheraspectto thisissue.Asdiscussedearlier,evenifmenandwomencontributethesameamounttoanRRSP,overall womenwillreceivelessofthetaxsubsidyassociatedwiththedeductionforthatcontributionbecause theytendtohavelowerincomesandpaytaxatalowerrate.Asnotedearlierthevalueofatax deductionistiedtotherateatwhichonepaystax,meaningthatthosewithhigherincomeswillreceive moreofthesubsidythanthosewithlowerincomes.Ifthetaxbreakweretobeintheformofatax credit,ratherthanadeduction,itwouldbeworththesameinvaluetothosewhocontributethesame amount. ThegapbetweenthenumberofwomencomparedtomencontributingtoRRSPshasbeendeclining overtheyears.In1997,forexample,56%ofmenand52%ofwomenmadecontributions.By2008the overallnumberofcontributorshaddeclined,althoughthegaphadnarrowedto51%ofmenand50%of

CanadaRevenueAgency,IncomeStatistics20102008TaxYear,InterimTable4athttp://www.cra arc.gc.ca/gncy/stts/gb08/pst/ntrm/tblseng.html. 62 Ibid,InterimTable2athttp://www.craarc.gc.ca/gncy/stts/gb08/pst/ntrm/pdf/table2eng.pdf. 63 ThesefiguresareespeciallyinterestingbecausegiventhatslightlymorementhanwomencontributetoRPPs andtheytendtohavehigherincomes,onemightassumethatmensRRSProomisreducedbythoseRPP contributions,therebymeaningthattheyhavelessopportunitytoaddfundstoaRRSP.

61

18 women.64OneconsequenceofthisgapisthatwomenhaveconsiderablylessfundsintheirRRSPsthan men.Theresultisthattheyarenotbenefittingtothesameextentasmenfromthetaxsubsidythat allowsincomeintheplantoaccumulateonataxfreebasis.TheFryCommitteenotedthatatthe middleandlowerearningslevelover90%ofpeoplehaveunusedRRSProom.65Furthermore,the distributionofRRSPsavingsdemonstratesthispointwiththetop20%ofCanadiansintermsofnet worthhavingamedianRRSPvalueof$111,100.Themedianfortheotherfourquintilesis$35,000, $15,000,$6,000and$0respectively.66 ThetaxrulesrespectingRRSPsestablishahierarchyoftaxpayersthatisininverserelationtotheirability toprovidefinanciallyfortheirretirement.Atthetoparethosewiththehighestincomes(predominantly men)andbelowthemindecliningorder,arethosetaxpayerswithlowerincomes.Atthebottomare thosetowhomthedeductionisworthless,eitherbecausetheydonothavefundstocontributetoa RRSPortheyhaveinsufficienttaxableincometobenefitfromthedeductionatall.Thesetaxrules simplyreinforcethecurrenteconomicinequalitybetweenrichandpoor,whichmapstoaconsiderable extentontothebetweenmenandwomen. SpousalRRSPs NeitherRPPsnorRRSPsarelikelytobeofanybenefittowomenwhoworkinsidethehomeanddonot participateinthepaidlabourforce.Thesewomendonothaveaccesstoemploymentbasedpension plansand,withnoincome,areunlikelytocontributetoaRRSP.Thetaxsystemrecognizesthisproblem andattemptstopartiallyredressitbyincludingspecialrulesthatapplytospouses.Asmentioned,an individualcancontributetoaRRSPsetupintheirspousesnameandtherebysplitincomewiththeir
StatisticsCanada,ParticipationinPrivateRetirementSavingsPlans,19972008at http://www.statcan.gc.ca/pub/13f0026m/2010001/tbl/tbl002eng.htm 65 Supranote5at24. 66 C.D.HoweInstitute,supranote5at67.
64

19 spouseinretirement.Whilethismeasureappearstobelaudable,ithasitsproblemsandindeedinthe 1980stheCanadianAdvisoryCouncilontheStatusofWomenlobbiedforanendtothissystemandfor pensionsforwomenintheirownright.67WhilethespousalRRSPisawellintentionedmeasure,it remainsahighlyprivateandlimitedresponsetoapublicissue:womenslackofaccesstopensionplans. Essentiallytheprivatefamilyisencouragedtoprovideforitsowneconomicsecurityinretirement,albeit withataxbreaktoencourageittodoso.Butmanycannottakeadvantageofthisopportunity.Low incometaxpayersmaynothavethediscretionaryfundstocontributeontheirspousesbehalf. Additionallysinglewomenhavenoaccesstothisexpenditure.Giventhat43%ofsinglewomenover65 livebelowthepovertylinecomparedto5%ofwomenwhohaveaspouse,itappearsthissubsidyis beingmisdirected.68Bylinkingthistaxexpendituretospousalstatus,thegovernmentisdirectingthe benefittoaverylimitedgroupofpeople,agroupthatmaynotbetheneediest.Furthermore,statistics showthatfewerpeoplethaneverarelivinginamarriedorcommonlawrelationship.69AstheWomen andTaxationWorkingGroupoftheOntarioFairTaxCommissionstatedtheconceptofacoupleasa lifelongeconomicunitwithjointincome,wealthandexpensesmaynolongerbeappropriategiven changingfamilystructures,increasingdivorcerates,andfallingmarriagerates.70 Infact,theintroductionofthepensionsplittingrulesdescribedabovemayleadtothedemiseofthe spousalRRSP.Asmentioned,thebenefitofthespousalRRSPisthatanindividualcansplitincomewith theirspousebydirectingfuturepensionincometothemthroughthemediumofthespousalRRSP.But thenewpensionsplittingrulesobviatetheneedtoestablishaspousalRRSPtoaccomplishthis objective.WhywouldataxpayerusetheirRRSProomtosetupaRRSPfortheirspousewhenthesame
67 68

DennisGuest,TheEmergenceofSocialSecurityinCanada,3rd.ed.(Vancouver,UBCPress1997)at197. StatisticsCanada,AnalysingFamilyIncome,at http:www12.statcan.ca/English/census01/products/analytic/companion.inc/Canada.cfm#4. 69 StatisticsCanada,WomeninCanada:AGenderBasedStatisticalReport,http://www.statcan.gc.ca/pub/89503 x/2005001/hfseng.htm. 70 Supranote59at22.

20 incomesplittingresultcanbeobtainedwithoutgivingupcontrolofthosefundsbytransferringthem intoaspousalRRSP?Rather,allthatisrequiredtosplitpensionincomeisthefilingofajointelectionby thetaxpayerandtheirspouseintheyearthepensionisreceived.71Furthermore,shouldtherelationship endpriortoretirement,thetaxpayerwillnothavetransferredfundstoaspousalRRSPthatarethe propertyoftheirspouse. PensionIncomeSplitting Thepensionincomesplittingrulesallowspousestojointlyelecttosplittheirpensionincome.Themain advantageisthatwhereonespousehasahigherincomeandthereforepaystaxatahighermarginal ratethantheother,theoveralltaxliabilityonthepensionincomewillbelessthanitwouldotherwise havebeen.Therulesallowupto50%ofthepensionincometobetaxedatthetaxrateofthelower incomespouse.72Generally,pensionincomesplittingbenefitsmenwhoaresupportingtheirfemale spouses.Theserulesareunfairandinequitableforseveralreasons.73First,thesplitispurelyfictional.No transferofanyofthepensionincometothespouseisrequired.Incontrast,ineveryotherinstance wheretheITApermitsincomesplittingtheremustbeatransferofthefundsthatarethesubjectofthe incomesplit.74Furthermore,whiletheremaybeanoverallbenefittothecouple,therecipientspouses

JonathanKesselmannotesthattherearesomelimitedcircumstancesinwhichspousalRRSPsmaybemore beneficialthansubsequentpensionincomesplitting.ThesecircumstancesrelatetospousalRRSPsflexibilityin termsofprematurewithdrawalsandearlyretirement.Myview,however,isthattheopportunityforthehigher earnerspousetomaintaincontrolofthefundsbycontributingthemto(usually)hisownRRSPratherthan transferringthemtothespousewouldoutweighthesepossibleadvantages.See,JonathanKesselman,Income SplittingandJointTaxationofSpouses:WhatsFair?IRPPChoices,2008vol.14no.1at20. 72 Kesselmannotesthatthereareotherscenariosinwhichasplitwouldbeadvantageouswhichdependonwhich spousehasmorepensionincome,ontheamountofeachspousesnonpensionincomeandoninteractionwith otherprovisionsofthetaxandbenefitsystem,ibidat20. 73 Foranexcellentcritiqueofthepensionincomesplittingrulessee,FrancesWoolley,supranote40. 74 TheseprovisionsincluderulesrelatingtospousalRRSPs,registerededucationsavingsplans,employmentofa spouseorchildinthefamilybusinessandthesharingofC/QPPincome,ibidat606.Onthisissue,seealso,Lisa PhilippsIncomeSplittingandFenderEquality:TheCaseofIncentivizingIntraHouseholdWealthTransfersCLPE ResearchPaper04/2010,vol.6no.1(2010).Inthispapertheauthoracknowledgestheproblemofpermitting incomesplittingwithoutanyrequirementthatthefundsbetransferredwhilearguingthatthecasecanbemade
71

21 marginaleffectivetaxratehasincreasedfromzerooralowratetoahigherrate,andshe(usually)is responsibleforpayingtaxontheincomeallocatedtoher,eventhoughshehasnotreceivedanyofthat income.Secondly,pensionincomesplittingisregressivebecauseitfavoursthosewithhighincomesover thosewithlowerincomes.Finally,giventhatsinglewomenover65liveinconsiderablygreaterpoverty thanthosewithspouses,thetaxsubsidyisarguablybeingmisdirected. Thepensionincomesplittingrulesarebasedontwotroublingassumptions.Thefirstisthatthecoupleis theappropriatetaxunitratherthantheindividual.Thesecondassumptionisthatthereisaneconomic mutualityinthespousalrelationship,amutualitythatinvolvessharingandpoolingofincome.These assumptionsareproblematic.75CanadahasalwaystreatedtheindividualasthetaxunitinCanada, althoughtherearenumerousprovisionsthattakespousalstatusintoaccount.But,unliketheUS system,forexample,Canadadoesnotallowspousestofileajointtaxreturn.AstheLawCommissionof Canadasaid[t]hecaseforindividualtaxationrestsupontheclaimthatataxsystembasedonthe individualisamoreappropriatepolicyinstrumentforachievingthegovernmentsobjectivesthanone basedonthefamily,thatitislesslikelytoinfluencetherelationshipsthatindividualsform,andthatitis morelikelytofurthervaluessuchasgenderequalityandindividualautonomy.76Withrespecttothe assumptionthatthereiseconomicmutualityinallrelationships,suchanassumptionissimplywrong.As NeilBrookshasstatedthereisnotanywherenearfullsharinginmanyhouseholds,letalonesharingof controlthatwouldindicatebothspousesvaluefamilyassets.77Generallytheearningsandassetsof individualsinarelationshiptendtobecontrolledbythespousewhohaslegaltitletothem.Thereare
formoreliberaltreatmentofgenuineintrahouseholdtransfersinordertoencouragearedistributionof resourcesinrelationshipsandincomesplittingcanbeatooltoaccomplishthatgoal. 75 ClaireYoung,WhatsSexGotToDoWithIt?TaxandtheFamily(LawCommissionofCanada,2000).Seealso, LawCommissionofCanada,supranote33at6389. 76 Supranote33at67.FurthermoretheLawCommissionofCanadarecommendedthattheindividual,rather thantheconjugalcoupleorsomeotherdefinitionofthefamilyunit,shouldremainthebasisforthecalculationof Canadaspersonalincometax,at71. 77 NeilBrooks,TheIrrelevanceofConjugalRelationshipsinAssessingTaxLiabilityinRichardKreverandJohn Headeds.TaxUnitsandtheTaxRateScale(Melbourne:AustralianTaxResearchFoundation,1996)at63.

22 othersituationswhereonecanspeculatethatincomeandcapitalisnotsharedorpooledina relationship.Forexample,relationshipsinwhichthereisasignificantpowerdifferential,includingthose characterizedbyapatternofcontrolorabuse,arenotlikelytohavemucheconomicmutuality.Louise Duludesuggeststhatcoupleswithrelativelylowandequalincomestendtosharemorethanother couples,78andofcoursepensionincomesplittingisofnobenefittothesecouplesatall. OPTIONSFORCHANGE WhatcanbedonetoredresssomeoftheinequalitiesthatIhavediscussed?Giventhatsomeofthe inequitiesexperiencedbywomenrelatetotheirlimitedaccesstotaxsubsidiesforprivatepensions plans,onecouldchangethetaxrules.Forexample,onecoulddealwiththeinequitabledistributionof thetaxsubsidyforcontributingtoRPPsandRRSPsbyconvertingthetaxbreakfromadeductioninthe computationofincometoataxcredit.79Theadvantageofthischangeisthattheamountofthetax creditwouldbeworththesametoalltaxpayers,regardlessoftheirlevelofincomeandtherateat whichtheypaytax.Onecouldevenmakethecreditrefundable,whichwouldmeanthatevenifan individualwasnotataxpayer,theywouldstillreceiveataxsubsidy.Butthisproposalhasitsproblems.It doesnotassistthosewhodonothaveaccesstoaworkplacepensionfund,orthosewhodonothave thediscretionaryfundstocontributetoaRRSP.Itisalsoaveryprivateresponsetoapublicproblem, thatiswomenslimitedaccesstoprivatepensionplansandtheirsubsequentpovertyinretirement. Beforereviewingotherproposalsforchangeitisimportanttoconsiderakeyquestion;thatis,whatis theappropriatebalancebetweenpublicandprivatepensionsinCanada?DoesCanadarelytoomuchon
LouiseDuludeTaxationoftheSpouses:AComparisonofCanadian,American,British,FrenchandSwedishLaw (1985)23OsgoodeHallLawReview67at89. 79 Thissuggestionhasbeenmadebyseveralcommentators.See,forexample,theOntarioFairTaxCommission, FairTaxationinaChangingWorld(Toronto:UniversityofTorontoPress,1993)at333andClaireF.L.Young, Women,TaxandSocialPrograms:TheGenderedImpactofFundingSocialProgramsThroughtheTaxSystem (Ottawa:StatusofWomenCanada,2000)at5051.
78

23 theprivatesectorfortheeconomicsecurityofitsretiredcitizens?TheOECDhasnotedthatthe proportionofretirementincomescomingfromprivatepensionsandotherfinancialassetsinCanadais oneofthehighestamongOECDcountries.80AsIhavedemonstratedinthisarticle,privatepensionsdo notworkwellforwomen.Weneedtomovetowardsamorerobustpublicpensionsystem,onethat takesthesocioeconomicrealitiesofwomenslivesintoaccount. TherehasbeenconsiderablediscussionrecentlyinCanadaaboutavarietyofoptionsforimprovingthe pensionsystem,includingstrengtheningtheCPP,addinganewCanadaSupplementaryPensionPlanand makingchangestoprivatepensions.81Forexample,theMintzreportconcludedthatthatoverall,the Canadianretirementincomesystemisperformingwell,providingCanadianswithanadequatestandard oflivinguponretirement.TheevidencedoesstronglysuggestthatsomeCanadiansdonothave sufficientreplacementincome.82WhileMintznotmakespecificrecommendationsforchange,the reportclearlyhascontributedtothedesireofthefederalgovernmenttoworktowardschangeinthis area.TheconsultationprocessembarkedoninMarch2010hasconcluded83althoughno recommendationshaveyetbeenreleased.ArecentexchangeoflettersbetweentheCanadianMinister ofFinance,JamesFlahertyandtheOntarioMinisterofFinance,DwightDuncanindicatesthatbothof thesegovernmentsseetheissueofpensionreformasoneofhighpriority.84Thequestionis,however, whatmightthatreformlooklikeandhowcanitbestaddresstheproblemsfacedbywomenwith respecttoensuringthattheyhaveadequateretirementincome?
PensionsataGlance,2009:RetirementIncomeSystemsinOECDcountries,(2009,OECD)at http://www.oecd.org/document/49/0,3343,en_2649_34757_42992113_1_1_1_1,00.html#country_highlights. 81 Seethereportsmentionedinfootnote5. 82 Supranote5at27. 83 Supranote6. 84 See,theJune10thletterfromOntariosFinanceMinisterDwightDuncantotheHonourableJamesFlaherty, MinisterofFinanceforCanadaathttp://www.scribd.com/doc/32867806/DuncanslettertoFlahertyandMr. Flahertysresponseathttp://www.scribd.com/doc/32867604/FlahertyslettertoDuncan.Thisexchange,which talksabouttheimportanceofintroducingfederalandprovincialproposalstoreformCanadaspensionsystem, tookplaceafewdaysbeforethemeetingoftheMinistersofFinanceandTreasurersonJune13thand14that Charlottetown.
80

24 Mystartingpointisthatbecausewomenrelytoamuchgreaterextentthanmenonthepublicpillarsof thepensionsystemanddonothaveasmuchinvestedinprivatepensions,thefirstrequirementisthat thepublicpensionsprovideanadequateretirementincome.Attheoutset,oneobviouschangewould betoincreasetheamountoftheOASandGISpaymentssothatattheveryleasttheyprovideanincome thatisabovetheLICO.TheFryCommitteerecommendedthattheGISberaisedtotheaftertaxlow incomecutoff,althoughitappearsinthecontextofthereportthatthecommitteemeanstheincrease shouldresultinacombinedOASandGISpaymentthatisnolessthantheLICO.85Unfortunatelythere hasbeennoindicationthatthefederalgovernmentiscontemplatingsuchachangetotheOASandGIS, withmostofthediscussionaboutreforminthepublicsectorfocusingontheCPP. ThereappearstobeaconsensusintherecentreportsonpensionsthattheCPPisagoodmodelfora pensionplan.MonicaTownsonseesitassecure,reliable,costeffective,andwellmanaged.86Viewed throughthelensofgender,itismoreuniversalthanaRPPbecauseitcoversallworkers,whetherfull timeorparttime.UnlikemanyRPPsitisportablewhenonechangesjobs.AstheFryCommitteehas noted,ittakesintoaccountwomenschildcareresponsibilitiesbyallowingaworkertoexcludethe yearswhentheirchildisundertheageof7fromthecalculationofthepension.87ButtheCPPcanbe improved.Oneglaringweaknessisthatitdoesnotprovideapensiontowomenwhoseworkisnotthe subjectofremuneration,suchaswomenwhoworkinanunpaidcapacityinthefamilybusinessand womenwhoworkinthehomeratherthanthepaidlabourforce.Theassumptionhasbeenthatthese womenaresupportedintheirretirementyearsbytheirspousesthroughsavingsortaxpreferred
FryCommittee,Recommendation2,supranote5at14. Townson,supranote5at3. 87 FryCommittee,supranote5at17.ItshouldbenotedthattheCommitteerecommendedthatthedropout provisionbeextendedtothosewhocareforsick,disabledorelderlypersonsrequiringcare,comparabletothe currentchildrearingdropout,Recommendation4at19.
86 85

25 investments,suchasspousalRRSPs.Againweseeaprivatizationoftheeconomicsecurityofthese women,withtheprivatefamilybeingassumedtobetakingonthatresponsibility.Suchanapproach underminestheautonomyofwomenandassumesaneconomicmutualityintherelationship,whichasI havediscussedearlierinthisarticle,isnotalwayspresent.Overtheyearstherehasbeenconsiderable debateaboutextendingtheCPPtohomemakersorspousesnotworkingoutsidethehome.Aslong agoas1983theParliamentaryTaskForceonPensionReformrecommendedthattheCPPoffera homemakerpension.88MorerecentlytheOntarioMinisterofFinanceheldhearingsonthefutureof theCPPandseveralpresentersarguedforanextensionoftheCPPtothosenotinthepaidlabourforce, suchaswomenworkinginthehome.89 VariousproposalstoimprovetheCPPhavebeenmadeandmostofthesefocusontheamountofthe pension.Attheoutset,itisimportanttonote,however,thatinorderforanychangestobemadetothe CPPtheconsentofthefederalgovernmentandatleast2/3oftheprovinceswith2/3ofthepopulation ofCanadaisrequired.90Currently,retirementbenefitsfromCPParedesignedtoreplaceonly25%ofa workersaverageadjustedannualearnings.TheCanadianLabourCongresshasproposedthattheCPP replacementratebedoubled.Specificallyitproposestophaseinadoublingoftheproportionof averageearningsreplacedbyCPPfrom25%to50%overseventotenyearsto$1,635permonth, financedbyamodestincreaseinworkerandemployerpremiumswhichwouldbefairforlowerpaid workers.91TheFryCommitteemakesasimilarproposalandrecommendsthattheCPPreplacement ratebeincreasedfrom25%to50%tomaintainadecentincomeandanacceptablestandardofliving,

HouseofCommons,ReportoftheParliamentaryTaskForceonPensionReform,(1983,QueensPrinter). OntarioMinistryofFinance,OntarioReportonPublicConsultationsontheCanadaPensionPlanat http://www.fin.gov.on.ca/en/publications/1996/cpp_.html. 90 Section114oftheCanadaPensionPlanAct,R.S.C.1985c.C8. 91 CanadianLabourCongress,Security,Adequacy,Fairness:LaboursProposalfortheFutureofCanadianPensions, http://www.canadianlabour.ca/sites/default/files/pdfs/PensionPolicyPaper2009EN.pdfat4.

89 88

26 andthatthismodificationcomeintoforceprogressivelyoverthenexttenyears.92BernardDussault preparedaproposalfortheFederalSuperannuatesNationalAssociationthatwouldalsoincreasethe retirementbenefitreplacementrate,butinamorespectacularfashion.93Itwouldgoupto70%of earningsovera47yearperiod.AsTownsonnotes[e]ffectively,thiswouldmeanthedemiseof workplacepensionplansandprivateretirementsavingsthroughRRSPsbecausetheCPPinconjunction withOASwouldprovideanadequatereplacementrateforall.94Suchanambitiousproposalis attractivebecauseitwouldmeansignificantlylargerpensionsforthosewhosesoleincomein retirementisfrompublicpensions,andthatmeasurewouldbenefitwomeninparticular. Anotherproposalistoaddanewpublicplan,theCanadaSupplementaryPensionPlan(CSPP)tothe currentofferings.ThisproposalfromtheC.D.HoweInstitute95isintendedtoassistthoseworkerswho havenoaccesstoRPPs.ItskeyfeaturesincludeautomaticenrolmentofallworkerswithoutaRPP (althoughitwouldalsoprovideanoptoutprovision),limitsontheamountthatcouldbecontributedat thesamelevelasthoseforRRSPs,atargetof60%ofpostworkearningsreplacement,andtheoptionto transfercurrentRRSPsavingstotheCSPP.96Acritiqueofthisproposalfocusesonthefactthat,unlike theCPP,thereisnoguaranteedpensionwiththeCSPP.Retirementpensionswoulddependonthe performanceofthecontributorsinvestments,andnoparticularpensionwouldbeguaranteedor indexed.Inotherwords,contributorswouldberequiredtobearthefullriskofretirementincome

FryCommittee,Recommendation11,supranote5at36. Townson,supranote5at5. 94 Ibid. 95 C.D.Howe,supranote5. 96 Ibid.at810.TheFryCommitteealsoappearstohaveendorsedaplanofthisnature.Recommendation12ofthe FryReport,supranote5,isthatthegovernmentintroduceanoptionalsupplementaryCanadaPensionPlan, conditionalonprovincialagreement,inordertohelpCanadianssavemore.

93 92

27 provision.97Furthermore,suchaproposalwouldnotbenefitthoseworkerswhodonothavethe discretionaryincometocontributetotheplan. AsmentionedthefederalgovernmenthasbeenholdingpublicconsultationsontheCanadianpension system.Todatewehavenowordonanyproposedchanges,butrecentdevelopmentshavegivensome cluesastothethinkingofthefederalgovernmentontheissue.Forexample,theJune2010exchangeof lettersbetweentheOntarioMinisterofFinance,DwightDuncan,andtheCanadianMinisterofFinance, JamesFlaherty,indicatesthatatthefederallevelthereissomeappetiteforimprovingtheCPP,although atthesametimeitisclearthattheroleoftheprivatesectorwillalsobeenhanced.Whileagreeingthat weshouldconsideramodestphasedin,andfullyfundedenhancementtodefinedbenefitsunderthe CanadaPensionPlan,MinisterFlahertyalsostatesthatOntarioandthefederalgovernmentshould worktogethertowardpensioninnovationthatwouldallowfinancialinstitutionsandinsurance companiestoofferbroadbaseddefinedcontributionpensionarrangementstomultipleemployers,all employees,andtotheselfemployed.98IndeedaftertheJunemeetingoffederalandprovincialfinance MinistersinCharlottetownMinisterFlahertysaidthatrulestoallowfinancialinstitutionstoserve employersofallsizescouldbeinplaceassoonasthemiddleof2011.99Thepressurefromtheprivate sector,andespeciallythefinancialservicesindustry,toexpandtheprivatepensionofferingsis considerable.Thefeeschargedformanagementofthesepensionfundsandmutualfundsare considerablewithhugeprofitstobemade.InarguingfortheCSPPratherthananexpansionofthe privatesector,theC.D.HoweInstitutenotedthatthehighfeesbeingpaidbyinvestorsinmanyretail productscouldseriouslyhampertheeffortsofsome5.5millionCanadianswithRRSPassetsfrom

97 98

TownsonReport,supranote5at3. Supra,note84at12. 99 See,http://www.thestar.com/business/article/823393ministersmoveclosertopensionreform.

28 achievingtheirsavinggoals.100AsforanychangestotheCPP,indicationsarethattherequirementthat therebestrongprovincialsupportforchangemaydelayreformwithsomeprovinces,mostnotably Alberta,notbeinginfavourofanychangeofthenaturesuggestedbyMinisterFlaherty.101 WHATNEXT? InthisarticleIhaveidentifiedseveralkeyproblemsrespectingwomensaccesstoretirementincome, problemsthatcontributegreatlytotheirpovertyinretirement.Itiscriticalthattheseinequitiesbe redressed.Ifnot,elderlywomenwillcontinuetoliveinpoverty.Ihavearguedthatimprovingthepublic pensionsystemwouldbeanimportantfirststeptowardsremovingthegenderinequitiesembeddedin currentpensionpolicies,despitethefactthatinthisneoconservativeerathepressuretolooktothe privatesectortosolvetheproblemsisconsiderable.TheFryCommitteereporthasmadesome importantrecommendations,butunfortunatelyitdidnotgrappledirectlywiththeissueofthebalance betweenpublicandprivateresponsibility.Inadditiontotherecommendationsreferredtointhisarticle, italsocallsforagenderbasedanalysisofallpolicyproposalsrelatingtowomenandpensions.102In particularitcallsforaconsiderationoftheimpactofunpaidcaregivingworkonthelifetimeofwomen; theimpactofeldercareresponsibilities.ontheretirementoptionsofwomen;andthefactthat womenhavelongerlifeexpectancythanmen.103Whilethisresearchisimportant,thevarious recommendationsoftheFryCommitteeReporthavebeenunderminedbythefactthatallConservative PartyMembersofParliamentontheCommitteedissentedfromthereportstatingthatthattheactions oftheConservativeGovernmentandtheMinisterofFinanceclearlydemonstratethatweareatthe forefrontonthisissueofretirementincomeadequacyforCanadianseniors.104Thisstatementfliesin thefaceofthestatisticsonelderlywomenspovertyandthefactorsthatcontributetoit,factorsthat
100 101

C.D.Howe,supranote5at8. Ibid. 102 FryCommittee,supranote5at30,recommendations9and10. 103 Ibid. 104 Ibid.at47.

29 cannotbedealtwithusingstrategiesthatarebasedonaprivateresponsibilityfortheeconomicsecurity oftheelderly.Theresearchhasbeendone,thereportshavebeenwritten,theconsultationshavetaken placeanditisnowtimeforwomenspovertyinretirementtoberecognizedasaninequitythatmustbe redressednow.