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In this chapter we profile current beneficiaries of a Surviving Spouse’s Pension (SSPs) and examine the extent to which the benefits contribute to the program objective of offering a measure of earnings protection to the survivors of a deceased CPP contributor. We then examine the appropriateness of different eligibility rules by examining the opinions of current survivors and the general public, and by simulating the effects of possible changes to the rules. A. Profile of Current Beneficiaries
1. Administrative Data Sources The number of recipients of CPP survivor’s pensions has increased rapidly over the last three decades, from less than 100,000 in the early 1970s to 735,345 in January 1996. In that month, 88.9% of the beneficiaries were women, and of the women 72.4% were over the age of 65. Exhibit IV-1 shows that the number of beneficiaries under the age of 45 is very small indeed. The total dollars expended for Survivor’s Pensions in 1995, including those to survivors living abroad, was $2.2 billion. In the month of January 1996 the domestic benefit expenditure was $180.7 million, with an average benefit of $244.01. Younger female beneficiaries—those of pre-retirement age—represented only 27.6% of the number of beneficiaries, but represented 32% of the dollar value of the benefits to female survivors. Details of the surviving spouses’ monthly benefit are shown below: Surviving Spouse’s monthly benefit:
EXHIBIT IV-1 Distribution of Survivor’s Pensions,* by Age and by Gender—January 1996
*Does not include QPP or benefits paid by the supplementary cheques system nor under international agreements on social security. Source: Canada Pension Plan, Statistical Bulletin, January 1996. Examination of annual benefits by age at start of benefits showed the same pattern for males and females: a tendency evident in the data from 1977 (the first year for which these data were examined) for men, and since 1982 for women, was for those who started benefits after age 65 to receive lower benefits than for those who started before age 65. The discontinuity of average benefits between the 60-64 and 65-69 age groups shown in the exhibit is caused by the change from the pre-retirement benefit, which consists of an earnings-related plus flat-rate benefit, to the post-retirement benefit, which is earnings related only. The drop in average benefits is particularly noticeable for males, where widower’s pensions are based on low earnings of their deceased wife. This effect is masked in the pre-retirement period by the presence of the flat-rate benefit. Exhibit IV-2 shows the trend in the number of new Surviving Spouse’s Pensions since 1984. Each year, until very recently, the number has grown quite steadily, for both males and females. This trend reflects demographic conditions among CPP contributors and their families. As of 1995, however, the data9suggest that the number of new benefits might be starting to stabilize, even to decline slightly. EXHIBIT IV-2 Number of New Surviving Spouse’s Pensions, by Gender and Year Number
Source:Canada Pension Plan Statistics. Analysis of other data shows:
EXHIBIT IV-3 Average Age at Start of Surviving Spouse’s Pension, by Gender
Source:Canada Pension Plan Master Benefit File extract.
2. Characteristics of Beneficiaries: The Survey Results The Survey of Beneficiaries of CPP Surviving Spouse’s Pensions provides characteristics of beneficiaries in terms of attributes not available through CPP administrative data. The respondents to this 1996 survey 11are derived from participants in Canadian Facts’ Canadian Family Opinion (CFO) Panel who indicated in an earlier survey that they were in receipt of a CPP Surviving Spouse’s Pension. The CFO Panel is a continuously-maintained panel, broadly representative of Canadians across the country. CFO panelists participate from time to time in responding to self-completion questionnaires on a variety of subjects. The response rate from qualifiers, i.e., those who said they were beneficiaries of a spouse’s benefit, was 81%. The results reported here have been weighted to reflect the known proportions of male and female beneficiaries—by province. We have no reason to believe that the results are biased in any respect that is likely to affect the usefulness of the profile or the interpretation of opinions with respect to CPP policy issues. We note, however, that the achieved sample may be somewhat better educated than the true population of SBs and may somewhat over-represent females with previous employment income.12 Reflecting the numbers presented in Exhibit IV-1, the majority of respondents to the survey are women: about a third are between the ages of 65 and 74 and fully 41% are 75 years of age and over.
Following is a profile of these female survivors:
Younger survivors (those under 45 years of age) were somewhat more likely to report receiving mortgage insurance or to say that the question was not applicable because they did not have a mortgage. B. Significance of Survivor Benefits in Total Family Income
Whether viewed by gender (Exhibit IV-4) or by age group, annual total incomes of recipients of Surviving Spouse’s Pensions, when expressed in 1996 dollars, have remained quite stable since 1977. EXHIBIT IV-4 Average Annual Total Income (1996$), by Gender
Source:HRDC Longitudinal Labour Force Data Base. Overall, the contribution of the Surviving Spouse’s Pension to beneficiaries’ incomes has also remained fairly stable over the past several years. Exhibit IV-5 shows the average percentage of total personal income accounted for by this benefit, for women and men, over the period 1979 to 1994. One exception to the overall trend occurred because legislative changes that took effect in 1987 resulted in increased benefit levels and a corresponding jump in the proportion of income attributable to the benefit. For women, the proportion before 1987 had held steady at around 16 per cent, then jumped to about 22 per cent in 1987. For men, the jump in 1987 was from about seven per cent to ten per cent. The percentage overall for men has been about half that for women because surviving male spouses tend to receive lower benefits and have higher incomes. The proportion for women dropped in the period 1992 to 1994, to about 18 per cent. The cause of this drop is unclear, but it is notable in that a similar pattern has not occurred for male beneficiaries. Without further analysis, it is not clear why these changes occurred. Combined benefit restrictions were made less stringent in 1987, but it is not clear that this fully accounts for the trends. EXHIBIT IV- 5 Average Percentage of Income Accounted for by SSP, by Gender
Source:HRDC Longitudinal Labour Force Data Base and CPP Master Benefits File. Legislative changes to the Canada Pension Plan increased the levels of Orphans’ Benefits in 1992. To the extent that such benefits were claimed as income by the surviving spouse, income would increase relative to the Surviving Spouse’s Pension and lead to a corresponding fall in the proportion of income represented by SSP. The observed drop in proportion in 1992 occurred mainly in the younger age groups, lending support to the hypothesis that changes to the level of Orphans’ Benefits were responsible for the drop. A trend perspective on the relationship of SSP to personal income is provided by looking at cohorts of survivors beginning to receive benefits. This analysis shows:
Legislative changes to CPP in 1987 caused a temporary increase in the proportion of personal income accounted for by SSP. The proportion has since decreased, slightly for males but quite markedly for females. For females, the peak occurred at 23 or 24 per cent, but the proportion has since dropped to about 18 or 19 per cent.
The data for each cohort of beneficiaries showed very slight fluctuations (usually only a few percentage points), but no consistent trend. Some cohorts appear to have reduced their dependency on SSP benefits over time while for others the dependency increases.
Considering the contribution of all CPP benefits to income, the patterns for male and female beneficiaries are not so dissimilar. In the mid-1980s, women depended more than males on all CPP benefits combined. But both before and since that time, the percentage of income accounted for by CPP benefits has not differed between men and women by more than two or three percentage points and has often been closer than that. Given the relatively older age of most recipients of SSP, this similarity suggests that men rely more on Retirement Pensions (as opposed to Disability Benefits) than do women, likely due to men’s traditionally higher rate of contributions. For the same reason, female surviving spouses receive greater SSP by virtue of their deceased husbands’ higher contributions.
As part of this evaluation we examined average annual total incomes for recipients of a Surviving Spouse’s Pension. The analysis reveals a different pattern when compared to the other labour force indicators. Although the trend over time is not as consistent as was the case for the other indicators, there is clear evidence that total annual personal incomes were generally higher after the start of survivor benefits, especially so for female beneficiaries. Exhibit IV-6 shows the average income for female beneficiaries who started to receive Surviving Spouses Pensions in 1988. This exhibit shows that their incomes have remained fairly stable over time, with perhaps a slight downward trend. The interest here lies in the jump in income levels associated with the death of a spouse and starting to receive benefits from the Surviving Spouse’s Pension, and perhaps from other sources as well, such as a survivor’s benefit related to a spouse’s employer-provided pension.
EXHIBIT IV-6 Average Income Per Year (1996 $), for Women Starting Benefits in 1988
Source:HRDC Longitudinal Labour Force Data Base and CPP Master Benefits File. Examination of the effect of coming into receipt of an SSP or other pension-related income is only a part of the picture, however. To appreciate the full effect, one needs data on the extent of income replacement of family income prior to receipt of SSP that, of course, includes the earnings of the now deceased spouse. This is examined later. The question can still be asked whether there is a need for spousal survivor benefits when the surviving spouse is working? To answer this question, we rely on assessment of the proportion of income accounted for by CPP survivor benefits as an indicator of need for benefits and compare its values by level of employment of the surviving spouse. Since the question is most salient with respect to women, our analysis focuses on females only. The analysis examined, by year, both the stock of current beneficiaries and cohorts of beneficiaries who started receiving Surviving Spouse’s Pensions that year. 13The first step was a simple comparison of the average proportions of income accounted for the Surviving Spouse’s Pension among female recipients who had no employment and those who were employed at least one week in the year. Not having employment is composed of two factors: being unemployed and not being in the labour force. For simplicity, we refer to these persons as unemployed. For the most part, we found the differences between the proportions of income contributed by SSP benefits for employed and unemployed female beneficiaries were between three and five percentage points, with less frequent differences both higher and lower than this range. But the average proportion of income accounted for by SSP benefits was less for employed beneficiaries throughout. This finding suggests that employed female beneficiaries rely less on SSP benefits as a source of income, although the differences are slight. For those who were employed, we pursued this analysis further by using regression models to assess the effect of additional weeks of employment on the proportion of income accounted for by SSP benefits. The analysis involved six models, one for the current stock of beneficiaries, and one for data from each of the five years after starting benefits.14 These results indicate that employed female beneficiaries generally receive a distinctly higher proportion of their income from SSP benefits and that each additional week of employment reduces the proportion by one-fifth to one-quarter of a percentage point. The model would lead one to expect that a beneficiary who was employed 30 weeks, for example would rely on SSP benefits for somewhere between 2.1 and 2.4 per cent less of their income than would be the case for a similar beneficiary who was employed for only 20 weeks. (The difference of ten weeks of employment is multiplied by the estimated coefficient for the variable weeks employed.) In a sense, these findings come as no surprise. Beneficiaries who are employed might be expected to have higher incomes than those who are not, whether the latter are unemployed, retired, or on welfare. Therefore, they should derive a relatively smaller proportion of their total incomes from the Surviving Spouse’s Pension. In any case, the observed differences in this proportion that are related to employment, while often consistent and statistically significant, seem not very large in relation to the average proportion. Evidence suggests that employed beneficiaries differ from those with no employment income with respect to the significance of benefits, but not greatly. There is, therefore, little justification for considering changes to the benefit structure or other changes to the program to accommodate such differences.
A major objective of the survey of beneficiaries using the Canadian Family Opinion panel was to establish the relative importance of the Surviving Spouse’s Pension in relation to the entire household income of the recipient. We have noted above that relatively few survivors were married or living common-law (8% of females) and relatively few were employed in 1995 (18% of females). We may expect, therefore, that employment income in 1995 from a new spouse or from their own employment will be a factor for only a minority of female beneficiaries. Other sources of income can be expected to vary. Exhibit IV-7 shows the sources of household income in 1995 reported by female panelists. In this exhibit the data are presented for female survivors less than 65 years of age and survivors 65 years of age and older. The exhibit shows that, in order of frequency reported, the five top ranking sources of household income for all female survivors other than Surviving Spouse’s Pensions (which by definition all respondents reported) are:
The Refundable Tax Credit and Employment Income (not necessarily their own) were the most frequently reported other sources of household income for pre-retirement women. For post-retirement women, OAS/ SPA and the Refundable Tax Credit, and CPP Retirement benefits were the most frequently reported. Orphan’s Benefits were mentioned only in multiple person households with survivor beneficiaries under age 65.
EXHIBIT IV-7 Sources of Household Income by Age—Females Only
Source: Survey of Beneficiaries, CFO Panel. Note: Percentages and totals based on respondents; five cases did not respond to any of the questions on sources of income. Exhibit IV-8 shows the distribution of a key analysis variable—Survivor Benefit as a Percentage of Total Household Income—which we will call "Proportion"15for female beneficiaries only. The average (mean) proportion is 19.3% of Total Household Income.
EXHIBIT IV-8 Distribution of "Proportion" for Female Survivor Beneficiaries Only
Source: Survey of Beneficiaries, CFO Panel. Analysis of detailed tables (not shown here) on the distribution of Proportion indicates that the Survivor Benefit represents less than 25% of total household income for as much as 74% of female SBs16. Exhibits IV-9 and IV-10 show the distribution of "Proportion" separately for females under and over age 65, respectively, displaying the relationship with total household income. This presentation focuses attention on the "pre-retirement" and "post-retirement" survivors. Each exhibit shows, for various levels of total household income, the average value of "Proportion" as well as the 95% confidence limits for each such average.17 Both exhibits show the expected relationship (since the Surviving Spouse’s Pension can never exceed a fixed annual limit), that "Proportion" is lower where total household income is higher. The two graphs are quite similar with respect to households with over $15,000 in total income. Below that level, however, female survivor beneficiaries under age 65 report higher average values of "Proportion". This is likely the result of the presence of an Orphan’s Benefit, which is of greater significance for those with lower levels of income. EXHIBIT IV-9 Survivor Benefits as a Percentage of Household Income—Females Under 65 Years of Age
Source: Survey of Beneficiaries, CFO Panel. EXHIBIT IV-10 Survivor Benefits as a Percentage of Household Income—Females 65 Years of Age and Over
Source: Survey of Beneficiaries, CFO Panel. For women with low household incomes—for example, less than $20,000 per annum—Survivor Benefits represent a very substantial contribution to the total. This is true for both pre- and post-retirement survivors.
Statistics Canada has linked taxation data for individuals into groups that approximate true census families. The resulting series of annual files is referred to as T1 Family Files (T1FF). We provided Statistics Canada with a set of specifications for linking data of recipients of survivor benefits with total family income from T1FF. Other CPP benefits were also taken into account. The chief contribution of the T1FF analysis to this evaluation is to confirm the proportion of family income represented by SB derived from the survey results, and to show that the proportion represented by SB has not changed much since 1987, although it has increased somewhat for the lowest income groups. In addition, it provides an answer to the question of the extent to which either the Survivor Benefit or SB plus other CPP income replace family income of the year prior to the death of the spouse. The data for the three years selected—1987, 1990 and 1993 (the last for which full data were available—yield a very large number of tables for analysis. Breaks were calculated by gender, age group, duration (years in receipt) of CPP benefits; family size and family composition. For purposes of this report, we focus on the results for women only and pay particular attention (as we did for the survey data) to women 65 years of age and older. Exhibit IV-11 shows the distribution of Proportion 1 (Survivor Benefits/Family Income) and Proportion 2 (Survivor Benefits plus other CPP Income/Family Income) for all female beneficiaries in 1993. In Proportion 1, Orphan’s Benefits are included where applicable—thus making Proportion similar to that reported in Exhibits IV-8 to IV-10. Other CPP-based sources such as Disability Benefits and CPP Retirement Pension are included in Proportion 2. The 1993 results, which show that "Proportion 1" for women with family incomes of $5,000-$7,499 averages 53%, are quite comparable to those shown in Exhibits IV-8 to IV-10 (from the survey results). The exhibit also parallels the data shown there for 1996 for higher levels of family income. Proportion 1 declines rapidly from 14% for family income of $20,000 to $24,999 to a low of 5% for family income in excess of $50,000 per annum. Proportion 2, that includes more CPP based income, is by definition consistently higher than Proportion 1. However, it too tails off to a low figure (7%) for those whose family income per annum is $50,000 or more. Other observations from Exhibit IV-11 are of relevance:
Exhibit IV-12 shows trends in Proportion 1 for females 65 years of age and older for 1987, 1990 and 1993. The downward level in proportion as family income increases is similar for all years to the pattern in Exhibit IV-10. The percentage of income represented by SB is slightly lower among post-retirement women than for all women. This is likely the effect of the flat rate component for pre-retirement SBs—as was noticed for other data as well. The trend over time is for the ratio of SB to Total Family Income to increase. This is especially evident for those in the lowest income groups. Exhibit IV-12 also presents data on Proportion 2, and here the pattern over time exhibits some differences from that observed for Proportion 1:
Exhibit IV-13 offers a slightly different perspective on the significance of SB. To this point we have examined the "stock" of beneficiaries of SB in each of the three years. Next we present data on the flow—or the new recipients of survivor benefits. The exhibit shows the proportion of family income reported in 1987, 1990 and 1993 that was "replaced" by SB (Surviving Spouse’s Benefit and Orphan’s Benefit) and by SB plus other CPP sources where payment of SB began in 1988, 1991 and 1994. EXHIBIT IV-13 Replacement of Family Income by SB or SB Plus CPP—All Females Who Started Receiving SB in 1988, 1991, 1994
Source: T1FF and CPP Master Benefit File. *Because total income is net of losses, it can be very small or even negative. Values less than $1 were converted to $1 for purposes of calculating the ratio, which led to uniformatively large values for the $0-$4,999 income group. The conclusions we draw are the same as for Proportion 1: above annual incomes of $15,000 SB by itself replaces less than 20% of income and the result is similar in all three years studied. Below $15,000, the replacement value of SB has grown over the three time periods examined. 6. Simulation Results Using MAPSIT a.Introduction As an additional perspective on the issue of the significance of SB in total family income, we used MAPSIT18 to produce a number of simulations to show how "Proportion" varies under a variety of hypothetical but realistic conditions. The difference between these results and those reported earlier from the survey is that survey respondents told us what proportion SB represented of gross family income; MAPSIT results describe the contribution of SB net of taxes and other transfers. To assess a wide range of possible results, we canvassed a number of scenarios: single seniors, young widows with children, and pre-retirement widows with no children—each with no benefits; one-half the maximum Surviving Spouse’s Pension; and at the maximum survivor’s pension. The analysis examined the effect of SB on disposable income while allowing income from other sources to vary from $0 to $100,000. A second set of scenarios included eligibility for social assistance or GIS to see what the net effect would be on family income. We concentrate on the results for the single seniors because, as we have seen, this is by far the predominant group of beneficiaries. We also examine closely the results for the young widow with children on social assistance. In general, the contribution of CPP Survivor Benefits to a household’s disposable income seldom exceeded 20%. b. The Single Senior Scenario The single senior scenario examines the results for a hypothetical individual with the following set of characteristics:
The analysis examines the effect on disposable income of the addition of two different levels of CPP survivor benefits while allowing income from private pensions and investments to vary. The first $1,000 of the latter is assumed to be private pension income, and therefore not subject to tax. With a maximum benefit of $5,235, the greatest increase in disposable income is $3,802 (or 73 per cent of the gross survivor benefit), when private pension and investment income is between $11,305 and $12,014. At half the maximum benefit ($2,617.50), the greatest increase is $1,901 (also 73 per cent of the gross survivor benefit), which occurs over a broader range of private pension income: between $11,305 and $14,631. Exhibit IV-14 shows the change in disposable income as a percentage of the gross benefit, by level of benefit for the single senior scenario where the beneficiary is eligible for GIS. This exhibit addresses the main issue surrounding the analysis: the value of the CPP survivor benefit to the household’s income. It considers the net CPP survivor benefit, after adjusting for the effects of transfers, and displays it as a percentage of the household’s disposable income.
EXHIBIT IV-14 Percentage Net Change in Disposable Income By Level of Benefit, Single Senior Scenario
Source: MAPSIT Simulation. We see that the CPP survivor benefit (that is the change in disposable income due to SB) accounts for at most about 20 per cent of the disposable income of this hypothetical type of household. This level is approached if private pension income is in the area of $12,000 and is available only if the household receives the maximum CPP survivor benefit. Elsewhere in the distribution of private pension income, the contribution to disposable income remains well below this level. If the household receives only half the maximum CPP survivor benefit, the greatest level of contribution to household income is 11 per cent, which occurs at a private pension income of about $11,500. For both benefit levels, the increase in disposable income attributable to CPP survivor benefits declines gradually above $15,500 of other income, due to higher rates of taxation. The exhibit also shows that over a certain range of relatively low incomes, the increase in disposable income was (perhaps) unexpectedly low. If the household receives private pension income of about $6,170, however, its disposable income increases by much less (only 8%). Within the range of private pension income surrounding this value, and in the presence of the survivor benefit, the household is not eligible for the provincial (GAINS) top-up to GIS, the GIS benefit is greatly reduced, and income is subject to both federal and provincial income taxes to an extent that is not the case in the absence of the CPP survivor benefit. A similar pattern occurs for households receiving half the maximum benefit (an increase in disposable income of only 3%). The above findings must be considered in relation to the likelihood that the conditions underlying this example would occur in practice. To assist this determination, the distribution of average gross family income of female survivors over the age of 65, drawn from the T1FF data file, is shown in Exhibit IV-15. EXHIBIT IV-15 Distribution of Total Family Income for Females 65 Years of Age and Older—1993
Source: T1FF. The point of maximum change in disposable income as a result of SB occurs at approximately $12,500 of personal private pension income, as shown in Exhibit IV-14. Taking into account OAS and CPP, this amount likely corresponds to about $20,000 in total family income. From Exhibit IV-15 we see that about one quarter of the 65+ female survivors fell into the family income range of $15,000 to $24,999 in 1993. This information leads to a conclusion that for most post-retirement women SB is not of major significance. Even for the one in four at low incomes for whom it is important, it does not exceed 20% of total income. c. Scenario Involving Single Parent With Two Children on Social Assistance In this scenario we examine the effect of SB on incomes of pre-retirement women with children. The household used in the scenario consists of a widowed female, age 33, with two children, ages 7 and 3, living in Ontario in a three-bedroom apartment. Total income, in current dollars includes:
The analysis then examined the effect of no SB; one half the maximum SSP and two Orphan’s Benefits; and the maximum SSP and two Orphan’s Benefit, assuming different levels of earnings. The presence of children in the household has a dramatic effect on the extent to which the SB increases what we term consumable income (disposable income less child care expenses). Analysis that compares scenarios with and without social assistance helped to isolate an unexpected result: when family earnings fall below $33,000—and especially between $14,000 and $20,000—the contribution of SB to household income is mostly negated by the presence of social assistance. In extreme cases, because of federal and provincial taxes paid, consumable income actually decreases as a result of the receipt of SB when the family is eligible for social assistance. In other words, the family would receive more total income through social assistance than through SB. How many cases in reality fit this modelled scenario? First, consider that earnings of $14,000 to $20,000 likely imply total income of perhaps $20,000 to $30,000, when tax credits, U.I. benefits, and other forms of income are considered. Exhibit IV-16 shows the distribution of single parent households under the age of 65. Among such SB recipients, 42% have incomes of less than $30,000 and about 17% fall into the critical range, where the presence of social assistance has its greatest impact. As a means of ensuring basic economic support levels for pre-retirement survivors of deceased CPP contributors who are eligible for social assistance, SB has little or no value over a range of household incomes that included many, although not a majority of, such households. EXHIBIT IV-16 Distribution of Total Family Income for Single Parent Households—SBs Under the Age of 65
Source: T1FF. d. Conclusion The contribution of CPP survivor benefits to household disposable income seldom exceeds 20%. One explanation for this may be that the effect of the CPP survivor benefit on disposable income is also very low, and sometimes negative, among survivors eligible for social assistance (or GIS) and income tax. If a household has a total income and assets such that it is eligible for social assistance (or GIS), the net change in disposable income that results from the CPP survivor benefit can be quite low because, without the CPP benefit, the household would receive an almost equivalent amount of social assistance. At the higher end of the range of such low incomes it can also happen that total income is large enough to be taxable. In this case, the household not only loses social assistance benefits equal to the CPP survivor benefit, but also pays taxes on the latter, resulting in a net negative contribution to disposable income. We recognize that the interaction of CPP survivor benefits and social assistance programs may be oversimplified in the scenarios we have run. Although CPP survivor benefits contain an element of social insurance, they are nonetheless based on an earned entitlement, while social assistance is a source of last resort for income support and is tested by the value of assets as well as income. Also, the scenarios presented here include only two extremes: those fully eligible and those not eligible for social assistance. Substitutability between CPP survivor benefits and social assistance is likely less fluid than it appears here, and will be further affected by various "self sufficiency experiments" for SARs that are in effect. Nevertheless, the phenomenon described is of interest and is described here as an anomaly of the program which is noteworthy. 7. Beneficiaries’ Perceptions of the Adequacy of Current Household Income In the Survey of Beneficiaries of a Surviving Spouse’s Pension, respondents were asked about the adequacy of household income both before and after the death of a spouse. For many survivors, a considerable number of years would have passed between the date of death of their spouse and their current recollections of the adequacy of the Death Benefit at that time. With respect to adequacy prior to the spouse’s death, women responded as follows: "more than adequate"—14%; "adequate"—68%; "less than adequate"—17%; and 2% did not respond. With respect to the adequacy of current income—i.e., after the death of a spouse—the pattern of response was: "more than adequate"—4%; "adequate"—59%; "less than adequate"—36%; and not stated—2%. Exhibit IV-17 shows, for female survivors only, the relationship between perceptions of household income before and after the death of the spouse. Examination of the columns in the table show where change of status has occurred: 29% of those with "more than adequate" pre-death income now say that their household income is less than adequate; 33% of those with previously "adequate" income now regard their income as "less than adequate." Predictably, the largest group of respondents among those with previously less-than-adequate income fall into the less-than-adequate category (54%) after the death of a spouse. Numerically, however, the largest portion of the female survey respondents with current household incomes perceived to be less-than-adequate are women whose income prior to the death of the spouse was regarded as "adequate." This group represents 22% of the sample of female beneficiaries.
EXHIBIT IV-17 Perceived Adequacy of Household Income, Before and After the Death of a Spouse—Female Survivors Only
Source: Question 7 and Question 10, Survey of Beneficiaries CFO Panel, 1996; 13 respondents did not reply to the questions. Who are the women who say their current household income is less than adequate? Data from the survey indicate that they are disproportionately numerous among:
C. Appropriateness of Eligibility Criteria for Survivor Benefits The question is often asked whether changes in the participation rate of women in the labour force today (and expected into the future) compared with that prevailing at the time of the introduction of CPP Surviving Spouse’s Benefits invalidates the current eligibility criteria. To qualify for a benefit, the surviving spouse must:
The questioning of the current system directs attention to a few specific issues:
The evaluation has assembled data and opinions on most of these eligibility issues from a variety of sources: interviews with key informants and a panel of experts; the survey of survivors; a survey of the general public; and analysis of a series of simulations using the CPP Actuarial model. 1. Key Informant Interviews and the Expert Panel Among key informants we interviewed, there was a strong disposition to state that the current eligibility rules for survivor benefits are inappropriate and that they have to be changed to keep pace with the changes in Canadian society that have taken place since the CPP was introduced. But beyond this consensus, there was none on what changes should be made. A majority believed that survivors rely on the benefit for income and that benefits should not be related to the employment/income of the survivor. The expert panel observed that if the flat rate component of SSP were to be eliminated, all payments would be related to earnings of the deceased contributor and the eligibility criteria that have been established would not be required. That would, in itself, not deal entirely with the eligibility issue, however, as the current law defines eligible beneficiaries as: "a spouse of a deceased contributor or a person of the opposite sex who lived in a marital relationship with the contributor before his or her death." Some experts saw the recognition of same sex partnerships to be inevitable. However, the broadening of the definition of spouse led to the observation that once eligibility is based on a "dependency relationship" it will be difficult to limit eligibility. As for eliminating the flat-rate component, there was no strong support, particularly as it is paid mainly in support of families. Experts also generally agreed that whether or not the surviving spouse is working, receipt of the survivor benefit is appropriate, since there is a need to support a period of adjustment to one income. Panelists differed, however, on the extent of the benefit, as they did on whether amounts of the benefit should vary according to the age of the surviving spouse. Some panelists suggested that the benefit should be uniform regardless of age, unless it was based on the presence of children; in which case it might be preferable to increase Orphan’s Benefits and decrease or make uniform the spousal benefit for pre-retirement spouses. The expert group was unanimous that any move to cease paying survivor benefits on remarriage of the surviving spouse would be retrograde. This provision was introduced into the CPP to protect women’s economic autonomy, and calls to cease benefits played into stereotypes that the number of remarried beneficiaries of the Surviving Spouse’s Pension is significant—a contention which the 1987 and 1996 Surveys of Survivor Beneficiaries show is not so. The latter survey found less than 10% were remarried. 2. Public Opinion on Eligibility Both current beneficiaries of the Surviving Spouse’s Pension and the general public were asked a series of questions on eligibility for SB. We first examine the five opinion items that were common to both surveys.20 In interpreting the results, we consider that a position lacks support if the largest proportion in the answer categories is less than 55%. Because we considered some of the questions to be difficult and perhaps not of interest to many respondents, we offered a "No Opinion" response category. This allowed respondents, who otherwise might have felt constrained to choose among reasons when in fact they had no view, to indicate that they had no opinion. In analysing the results we do not repercentage the responses omitting the "Don’t Knows." Rather, for a view to be considered to enjoy majority support, it must be held by at least 55% of the respondents, including those with no opinion. Survey respondents were clearly divided on three eligibility-related questions:
In general, the level of no opinion is higher in the survey of beneficiaries than it is in the general population survey. We conclude from Exhibit IV-18 that there is no clear support for eligibility changes on the three aspects noted from the perspective, at least, of general public opinion and that of current survivors. With respect to relating benefits to the duration of union, a complex gender/age result occurs: older males and females in the general population and male and female survivors think benefits should be linked to duration of the union, whereas both females and males in the 25-44 age group are more inclined to oppose the linkage with duration. Exhibits IV-19 and IV-20 compare the responses of male and female survivors with those of the 25-44 sample and the 45 and older sample of the general public, on two other eligibility issues—relating SB to the level of the survivor’s income and the impact of remarriage on eligibility. There is slightly more support for relating SB to survivors’ income in the general population than among the current beneficiaries. However, respondents in the general population surveys are quite divided. No age or gender differences appeared in the pattern of responses in the 25 to 44 sample, the 45 and older sample or the survivor’s survey. On the latter opinion question, a strong majority emerged in the general population surveys for a change in eligibility from the status quo. A significant majority of both the 25-44 sample and the 45 and older sample think that if a surviving spouses remarries he/she should not receive a survivor benefit. Again, there were no age or gender differences among the general population respondents. A gender difference arises among survivors, however. A majority of males favoured the status quo whereas female survivors were divided.
EXHIBIT IV-18 Views of Respondents on Three Eligibility Issues—Survivor Beneficiaries and General Population—By Gender and Age
a)Age of Surviving Spouse Some people say that younger surviving spouses should receive the same benefit as older survivors. Others prefer the current eligibility criteria. What is your opinion? (Circle One Answer.)
Source: Q.6 General Population Survey; Q.19 Survey of Beneficiaries. b)Duration of Union Under the current eligibility criteria for a CPP Surviving Spouse’s Pension, benefits are payable to the surviving spouse or to a common-law partner if he or she had lived with the deceased contributor for at last one year immediately prior to death. Some people say that the benefit should be related to the duration of marriage (or period of co-habitation) to the contributor. What is your opinion? (Circle One Answer Only.)
Source: Q.7 General Population Survey; Q.20 Survey of Beneficiaries. *Due to rounding. EXHIBIT IV-18 Views of Female Respondents on Three Eligibility Issues—Survivor Beneficiaries and General Population (cont’d)
Q.21Treatment of Separated Spouses Under the current eligibility criteria for a CPP Surviving Spouse’s Pension, separated spouses (formerly married to the contributor) are not eligible for a survivor benefit if there is an eligible common-law partner who had been living with the contributor for at least one year prior to the contributor’s death. Some have suggested that the common-law partner and the former spouse should both be eligible for a portion of the one survivor benefit. What is your opinion? (Circle One Answer Only.)
Source: Q.8 General Population Survey; Q.21 Survey of Beneficiaries.
EXHIBIT IV-19 Relating Eligibility to the Level of the Survivor’s Income—Comparison of Survey Results
Source: Q12, General Population Survey; Q. 23, Survey of Beneficiaries, CFO Panel. EXHIBIT IV-20 The Impact of Remarriage on Eligibility—Comparison of Survey Results
Source: Q10, General Population Survey; Q. 22, Survey of Beneficiaries, CFO Panel. A few questions on SB eligibility were included in the general population surveys that were not included in the survey of beneficiaries. These yield the following findings:
D. Summary Nearly 90% of current survivors are women, most of whom are neither married nor employed. The average age of female survivors starting benefits has risen considerably in the last decade. There has been a dramatic increase in female beneficiaries over age 75. The survivor benefit represents a significant proportion of household income for not more than one-fifth of the female survivors. Multiple lines of evidence confirm this conclusion. For low income women, those with $10,000 income or less, the benefit represents from 35% to 60% of total gross household income. Female survivors who perceive their current income to be less than adequate are disproportionately numerous among women of pre-retirement age and with little or no education. The general public tends to be both restrictive and generous with respect to eligibility for benefits. They think that survivors who remarry should not receive a benefit, but they would open up eligibility for younger pre-retirement survivors beyond the disabled and those with children. Experts and key informants think the current rules are, by and large, appropriate. Even on the more controversial pre-retirement eligibility rules, there is general acceptance of the income support aspects—largely because the principle of income support for families overrides their dislike for a departure from the income replacement principle.
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