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• Introduction
• What was evaluated
• Highlights and Conclusions

Introduction

This study is part of a review by Human Resources Development Canada (HRDC) of various aspects of the CPP, including retirement and disability benefits. The CPP is funded by compulsory contributions from wage earners. The CPP provides these workers and their families with a basic level of earnings when they retire, become disabled or die. CPP is available to workers throughout Canada, except in Quebec, which has a program of its own – the Quebec Pension Plan (QPP). In February 1997, HRDC completed an evaluation of CPP Survivor Benefits; the key findings of that study are summarized here.

What was evaluated

Survivor Benefits comprise a Surviving Spouse’s Pension, Orphan’s Benefits, and a Death Benefit. Key program features were evaluated, including the general dropout provision which allows 15% of years of lowest earnings to be dropped out in calculating CPP benefits; the child rearing dropout which permits parents to drop out additional years for raising children up to seven years of age; and credit splitting which divides CPP pension credits between members of divorced or separated couples.

The evaluation examined the rationale for survivor benefits, the extent to which program objectives have been met, the importance of survivor benefits as a source of income, and the impacts and effects of the benefits.

Highlights and Conclusions

The rationale for survivor benefits remains despite social changes.
Families have changed since the mid-1960s when men were the principal breadwinners and women stayed home to look after the children; however, the need to replace lost family income when one spouse dies has not diminished. Ninety per cent of survivors are women, and orphan’s benefits are paid mainly to help support children who have lost their fathers.

Survivor benefits are very significant for a minority of women survivors.
For 80% of female survivors, the survivor benefit represents less than 20% of household income. However, widespread evidence indicates that for low income women—those with $10,000 in income or less—survivor benefits represent a very significant proportion of total household income. The proportion of income represented by CPP survivor benefits has increased most dramatically among women with the lowest income.

Surveys showed there is a disproportionately high number of women of pre-retirement age and with little or no education among female survivors who say their current income is less than adequate.

Experts and the public differ somewhat on eligibility rules for survivor benefits.
Experts and key informants think the current eligibility rules are generally appropriate. There is even acceptance of the controversial notion of income support–as opposed to income replacement–as a legitimate aspect of pre-retirement survivor benefits.

Experts were also unanimous in opposing any suggestion that a surviving spouse who remarries should stop receiving benefits. According to surveys, the Canadian public believes survivors who remarry should not receive a benefit. On the other hand, Canadians said they would extend eligibility to younger pre-retirement survivors who are not disabled and don't have children.

The retention of other survivor benefits, dropout provisions and credit splitting is generally well supported.
Experts and key informants supported retaining the death benefit and orphan’s benefits, as well as the general and child rearing dropout provisions, and credit splitting.

Among beneficiaries, more males than females found the death benefit to be “less than adequate.” Female survivors, key informants and experts were consistent in the view that the death benefit makes a reasonable contribution following the death of a spouse.

Many survivors thought the Orphan’s Benefit should be renamed; a more sensitive choice might be the Surviving Child’s Benefit. The public supported the idea of the Orphan’s Benefit, but also felt strongly that it should be extended to at least 22 years of age, even for individuals not in school.

The public also favoured extending the general dropout provision to cover other forms of family-related care-giving; however, there was no agreement on how long the general dropout should be.

The experts and the public differ on the mandatory aspect of credit splitting: the public is more disposed to negotiation in the case of divorce and separation; the experts favour mandatory provisions.

Survivor benefits do not have a major impact on labour force behaviour.
Women’s labour market behaviour is little affected by the death of a spouse and the receipt of a benefit. Most of the current beneficiaries were not working when their spouse died and that situation did not change afterwards. Trend analysis showed a drop in the number of weeks worked by women both before and after the start of benefits.

HRDC also found that the proportion of income provided by survivor benefits differed only slightly between employed survivors and those with no employment income. The data did not support the idea of reducing benefits to employed survivors.

It is unlikely that more survivors will be employed at the time of their partner’s death in the future. Because men are living longer and people are retiring earlier, it is more likely that neither partner will be working when a spouse dies, and the survivor will probably not seek or find employment.

No major unintended impacts of CPP were found, but some anomalies exist.
The introduction of the child rearing dropout and flexible retirement have made the contribution period and general dropout variable rather than fixed and this may result in inequities favouring those who begin collecting benefits before age 65.

The child rearing dropout provision is best suited for women who have had a strong attachment to the workforce before dropping out completely to care for children. However, this model is less common today than it was when the provision was designed.

The child rearing dropout does not generally reproduce the benefit that the contributor would have received, had he or she not left the workforce.

Several program changes warrant serious consideration.
The evaluation of CPP Survivor Benefits indicates that the basic structures should be retained. However, HRDC has identified a substantial list of potential changes based on input from key informants, survivors, and the general public. It appears that “modernizing” the CPP could be done without adding to costs and making administration of the program more complicated.