Researcher's Summary

Canada was a prosperous nation at the end of the 1960s, but an unacceptably high number of Canadian seniors continued to live in poverty. Over the 1970s and 1980s, there would be significant expansion and reform of the federal government's retirement income programs as policy increasingly focussed on channeling resources to lower-income seniors. This era of reform culminated in 1987 with what were perhaps the most sweeping changes to the Canada Pension Plan since its introduction 21 years before. The amendments were an answer to a lengthy process of negotiation between the federal and provincial governments.

In the 1960s, Canadians were optimistic that the economy would continue to grow and that the financial health of the country meant any expansion of the retirement income system would not be overly onerous. However, over the next two decades, a number of economic recessions occurred. In addition, the federal government's annual spending steadily increased and its fiscal position deteriorated from surplus to deficit. Double-digit inflation, unemployment and slowed economic growth brought pressure on the country's social security system at the same time that the government's capacity to respond was being undermined by rising costs and lower revenues.

Many of the initiatives undertaken in the pension programs in this period were efforts to offset the effects of inflation on the incomes of older people, as well as attempts to target groups that were most vulnerable to poverty, like single senior women, low-income workers, and the disabled. There were also reforms aimed at promoting the equality and inclusiveness that was being called for by groups such as women and Aboriginal people, who were marginalized by the existing arrangements. Overall, the goal was greater income equality among Canadian seniors.

Efforts to combat poverty and inflation were addressed in the Old Age Security program when the "temporary" Guaranteed Income Supplement became permanent. A Spouse's Allowance and a Widowed Spouse's Allowance, both income-tested, were added for couples and near-seniors. Better inflation protection was put in place. From 1973, benefits were indexed quarterly as opposed to annually and indexation was linked to the Consumer Price Index.

In 1977, partial Old Age Security benefits were made available to people who could not meet the full residency requirements, provided they had lived a minimum of 10 years in Canada, or 20 years if they were currently residing abroad. Furthermore, Canada acquired the authority to enter into international social security agreements, in order to offer protection and pension portability to migrants.

In the Canada Pension Plan, the earnings-related, contributory program that had been introduced in 1966 to form a second level to the government's retirement income system, greater-than-expected inflation and wage increases led to a new formula for determining the "Year's Maximum Pensionable Earnings". This was the maximum amount of wages on which a worker could contribute to the Canada Pension Plan. The new formula adjusted that amount upward gradually until it produced retirement benefits that more accurately reflected real industrial wage rates.

Canada Pension Plan reforms also benefited families and helped women to achieve greater financial independence. In 1978, the credit-splitting provision arrived, allowing for the equal division of Canada Pension Plan credits earned during a marriage upon the break-up of a couple. As well, a child-rearing drop-out provision was introduced that would allow parents to stay home and care for their young children without being penalized for these low-earning periods. The latter provision did not take effect until it was provincially ratified in 1983, but was applied retroactively to 1978.

In 1987 the federal Conservative government, led by Brian Mulroney, and the provincial governments agreed to major Canada Pension Plan reforms including:

• flexible retirement between the ages of 60 and 70 years. The pension benefit would be reduced for each month it was taken before age 65, and increased for each month after 65;
• improved disability protection through an increase in the flat rate portion from $91.06 to $242.95. The flat rate is one of the two components that make up the disability pension. The other component is based on a person's earnings;
• an increase in contributions to the Canada Pension Plan over a 25-year period. This was to be reviewed jointly by the federal and provincial governments every five years;
• the sharing of retirement pensions between spouses;
• the continuation of survivor benefits if the surviving spouse remarried; and
• eligibility for Status Indians to participate fully in the Canada Pension Plan.

There was, as well, a new commitment to gender equality that brought positive change for both men and women. As of 1975, male survivors would be entitled to the same benefits that female survivors had been receiving since the beginning of the Plan. Common-law relationships were redefined and given full recognition in 1987.

By the end of this period, the sustainability of Canada's public pension system had become a major concern as Canada's senior population continued to increase. In 1989, the government reduced Old Age Security pension benefits paid to high-income earners in what has been referred to as the "clawback." As well, changes were made to Canada Pension Plan contribution rates to protect the long-term viability of the fund that paid the benefits.

The Canadian economy had improved by the end of the 1980s but problems remained, including a growing national debt. Concerns over the sustainability of the country's retirement income system would persist into the next decade.