Income Protection for Retirees Canada

Means-tested and social insurance programs have evolved to provide income support to people who cannot, or are not expected to, support themselves. Thanks to old-age income protection schemes, typically referred to as social security, growing numbers of men and women around the world face an economically secure old age, free of work. Between 1940 and 1999, the number of countries with programs that provide cash benefits to older persons, the disabled, and survivors rose from thirty-three to at least 167.

Social security programs take a variety of forms. They may be noncontributory and paid for out of general revenues, or they may require contributions from workers and employers. They may be defined benefit plans, which use a formula to calculate benefits based on some combination of earnings and years of employment, or defined contribution plans, whose benefits depend on plan contributions. Some provide a flat-rate benefit to all residents of a country, subject to certain conditions; others are based on work histories and years of earnings. Programs may be targeted to individuals or families with income and/or assets below a certain level; others pay benefits to anyone who has met the contribution requirements. Mandatory savings programs, such as provident funds, are found in a number of countries, and in a few countries, mandatory private pensions add another layer of income protection in old age.

In the more developed countries of the world, social security coverage is nearly universal. The continued aging of the population of the more developed countries is prompting many of them to reassess their social security systems in light of rising old-age dependency ratios and concern that the public sector might not be able to maintain current levels of support without substantially higher taxes. In many countries, efforts to reduce the rate of growth of social security expenditures while ensuring adequate retirement income have resulted in the reform of old-age social insurance schemes along with the promotion of occupational pensions and individual saving for old age. This has been the case in Canada, whose approach to old-age support shares a number of features with that of the United States, while it also differs in fundamental ways.

Canada, like the United States, has a public, mandatory, contributory, earnings-related pension program covering almost all workers, which provides a portion of the income workers will need in retirement. Disability benefits are available in both Canada and the United States. Both countries also offer tax incentives to encourage employers to offer private pensions and residents to save for their own retirement. Canada, however, provides what is referred to as a universal benefit, although it is subject to recovery from higher income persons. Supplemental payments may be available to those with inadequate income. The United States lacks a universal benefit, but it, too, offers protection to very low-income elderly through a separate, means-tested program of income support, the Supplemental Security Income Program.