Senior Poverty Rates and Canada’s Public Pension System 

A bit of history and context for today's debates

I recently offered a brief public lecture, intended for a very general audience, describing our public pensions and how they've affected senior poverty. The notes are useful to hold onto, so I decided to provide that here.  The usual caveats all apply: the history I provide here is clearly incomplete, intending to offer an overview of key features and trends.  A complete history requires writing a book, not a note like this.

Public Pensions: First Age of Benefit Eligiblity

Over the past century, there are surprisingly few major reforms to our public pension system. But I point to some key changes in the eligibilty ages in the figure above. 

• First, we introduced the Old Age Pension in 1927, as a means-tested program available to anyone age 70 or older.  The amount you could receive was quite small, and depended on your income and assets.

• In 1952, we introduced the Old Age Security pension. This was our first 'universal' pension, as it didn't have an income test. In 1952, you could receive the benefit at age 70.

• In 1952 we also introduced the Guaranteed Income Supplement, replacing the Old Age Pension as an income-tested benefit. You could receive this as early as age 65.

• In 1967 we dropped the OAS age to 65 at the same time we introduced CPP and QPP, also available at age 65. This became our "standard" retirement age and remains the key benchmark today.

• In 1975 we introduced the spousal allowance at age 60 (it is basically GIS for those whose spouse is age 65 or older), and in 1985 we introduced the "Allowance" at age 60 (GIS for widows/widowers).

• In 1987 (1985) we allowed for early CPP (QPP) take-up, adjusting benefits to account for extra years when taken up as early as age 60, or fewer years when taken up as late as age 70.

The main simple point here is that over the past century we've allowed people to take up benefits earlier and earlier.

Benefit Generosity

Below I present the 'maximum' benefit amounts one could receive from our public pensions, adjusted for inflation so that it's in 2025 dollars. The dashed line represents most OAS and GIS (combined) a single person with no other taxable income could receive. The solid line for CPP is the maximum pension if a person initiated their pension at age 65. 

You can see some key policy decisions noted on the figure above:

• In 1985 we started indexing OAS and GIS to the CPI, so it's always increasing when prices increase. When everything is presented in 2025 dollars, a flat line here tells you the benefit is increasing with prices so that 'purchasing power' is effectively constant.

• There's been a few increases to GIS. In 2006-7 we increased GIS for all seniors; in 2011 we added a top-up for the lowest-income seniors, and in 2016 we boosted benefits for single seniors. 

• After making some upward adjustments in the earlier 1980s, CPP benefits effectively became indexed to wage inflation. As wages often rise faster than prices, there's some increases in real benefits after this.

• I noted the changes in 1997 - we raised CPP premiums to help pre-fund pensions of an aging population. I often presented this as one of those really good long-term planning policies that got to be good politics too. (Recall there was opposition at the time. Check out my screenshot at the bottom of the page.)

The main point here is that over the course of several decades, these benefits have mostly become more generous.

Poverty lines - the MBM

So then we want to think about how important the public pensions are for getting seniors over the poverty thresholds. Picking a line is a good coversation to have, but I'll start with our official poverty line - the Market Basket Measure. In the figure below, I added two lines as examples for a single person in Kitchener-Waterloo-Cambridge and a single person in a small town in Quebec.

In the early 1960s, where ever a senior lived, the public pension on its own would leave a senior far below any poverty threshold in Canada. However, by the 2020s, even if a person had absolutely no other income, the OAS and GIS combined would get a person close. Even a small amount of paid employment, or a bit of CPP/QPP could be enough to get one over this poverty threshold. 

Senior poverty rates & public pensions

Unfortunately our MBM doesn't have a long history in Canada, and the threshold changes regularly to reflect the changing needs of Canadians. So if you looked at the official poverty rates, senior poverty was 5.5% in 2023 but we have nothing to compare it to for earlier decades. (You can find more breakdowns at Statistics Canada, table 11100135 if you like.) For historical comparisons I usually pull out the Low Income Cut Off (LICO) statistics. the orange line below shows senior poverty rate - around 30% in the 1970s - falling to something around 5% in the 2020s.  You can work out some great statistics to align this well, or just eyeball it against the graphs above - in the end we conclude that public pensions have been incredibly important for bringing down senior poverty rates.

The Policy Conversation

So then we think about policy. Senior poverty rates are low, especially when compared to unattached people (single, no kids) under age 65. Child benefits have done a lot to bring down poverty rates for children (and their families), but the poverty rates for those singles without kids have generally stayed above 30%. (2020 and later: there were several benefit programs boosting incomes of the lowest income individuals at this time, but these are not typically permanent programs.)

My own take: In a world where the portion of the population over 85 is growing quickly, we're struggling to fund long-term care and home care, young people are struggling to start careers and enter the housing market, senior poverty rates are very low, and many people over age 65 are living longer, healthier, and wealthier lives ...  we should really think harder about whether 65 year olds with high incomes should still be getting OAS cheques. There's lots of options to redesign programs in a way that protects vulnerable seniors, especially those with the lowest incomes. It makes sense to most people that this social contract we have - where a young generation is relied upon for large transfers to an older generation - needs updating.  

But then there's politics.

Sidenote: I wrote a paper about this many years ago. 

• Schirle, T. 2013. “Senior poverty in Canada: A decomposition analysis.” Canadian Public Policy, Volume 39(4) December 2013, 517-540.

On politics: a simple reminder that getting policy changed is always hard. There's usually some version of 'now is not the time' to do better, and the opposition will claim everything will fall apart.  (With apologies for a lack of sourcing, I grabbed this screenshot a while back and need to find the original source again.)