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Fiscal measures to support older adults and reduce poverty

The Bottom Line

  • Living in poverty is of particular concern to older adults, given the challenges associated with aging (for example, having multiple chronic conditions, the loss of autonomy, and reduced access to social and community support).
  • Fiscal measures are often proposed to reduce the tax burden of older adults and reduce poverty.
  • Finding the fiscal measures to which you are entitled can make anybody feel dizzy, but some professionals and tools can help you.

According to Statistics Canada, Canada ranks 12th among Organisation for Economic Cooperation and Development (OECD) countries with an average poverty rate of 14.3% for older adults (ranging from 4.1% in Alberta to 26.7% in Newfoundland and Labrador).(1) Poverty reduction measures are an important approach to improving health and well-being. Although the number of low-income older adults in Canada has declined since 1976, the fact remains that older adults are more likely to be at the bottom of the income distribution ladder. Living in poverty is of particular concern to older adults, given the challenges associated with aging (for example, having multiple chronic conditions, the loss of autonomy, and reduced access to social and community support).

Fiscal measures in Canada

Tax credits and benefits are often proposed to reduce the tax burden on older adults and, hopefully, reduce poverty among older adults.(1)

At the provincial and territorial level, tax credits and benefits vary widely. There are tax credits for expenses incurred by older adults to maintain their independence, tax credits for home support, credits for older adults living alone, deductions for retirement income transferred to spouses, and many housing-related measures (including older adults' housing benefit programs, and renovation credits to help older adults age at home).

At the federal level, the Old Age Security program is the largest pension plan offered by the Government of Canada. In addition to the Old Age Security program, other types of federal tax credits and benefits are available.

- Guaranteed Income Supplement >> a non-taxable monthly benefit available to Old Age Security recipients who have low incomes.

- Survivor Allowance >> a benefit available to people aged 60 to 64 who have low incomes and whose spouse is deceased.

- Canada Pension Plan >> a program to provide contributors and their families with partial income replacement in the event of retirement, disability or death.

- Registered pension plan >> an arrangement offered by an employer or a union that provides pension benefits in the form of periodic payments to retired employees.

- Retirement savings plan >> a savings plan that allows the tax payment on contributions to be deferred to a future year and accumulates tax-sheltered capital.

- Pension income splitting >> an arrangement whereby a person splits his or her eligible pension income with their spouse in order to reduce their taxes.

- Other tax incentives, including tax credits, deductions and exemptions related to public transit or home renovations.

The impact of tax measures on poverty among older adults

Although several fiscal measures are proposed to reduce poverty among older adults, there is limited research evidence about their effectiveness.

A recent rapid synthesis (a synthesis of research evidence done in a short period of time, but in a systematic and transparent way) found that there are few systematic reviews examining the effectiveness of fiscal measures in reducing poverty among older adults.(1) However, studies show that increasing the age of eligibility for Canada's tax benefits from 65 to 67 years of age would have a negative effect on the health of low-income older adults, and increase the percentage of low-income people, particularly women. Women are more likely to have precarious jobs and generally earn lower wages than men. They often have to act as caregivers, more often head single-parent families, and are more burdened with family management, which reduces their years in the workforce and therefore their retirement benefits. Research also reveals that changes to the Canada Pension Plan may affect the generosity of employers in contributing to registered pension plans. Finally, since retirement income is not all taxed in the same way, an increase in pension income may increase the marginal tax rate that could result in the loss of benefits for some older adults.

Looking at international studies, a recent systematic review found that social pension plans (giving regular payments to older adults) have a protective effect for older adults and are associated with better health outcomes for older adults living in poverty.(2) In addition, social pension plans seem more effective at reducing poverty among older adults than social-housing measures. However, the authors of the systematic review were unable to determine which social pension plan is the most effective (universal pension plans that can be claimed by all older adults, regardless of their wealth, or pension plans available only to older adults with income below a certain level).

Navigating the fiscal system

Finding the fiscal measures to which you are entitled can make you dizzy! And understanding whether you are eligible for your particular situation (for example, your age, your family situation, your health status) makes things even more complex. Tax professionals, such as accountants, can help you navigate the fiscal system. There is also a simple tool developed by the Government of Canada that allows you to obtain a personalized list of benefits to which you may be eligible: http://www.canadabenefits.gc.ca/


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References

  1. Mattison C, Gauvin FP, Wilson MG. Rapid synthesis: Identifying tax benefits or incentives to reduce poverty among older adults. McMaster Health Forum, Hamilton: Canada, 2018. [cited in September 2018]. Available at https://www.mcmasterforum.org/docs/default-source/product-documents/rapid-responses/identifying-tax-benefits-or-incentives-to-reduce-poverty-among-older-adults.pdf?sfvrsn=2
  2. Kwan CW, Christine A. Old age poverty: A scoping review of the literature. Cogent Social Sciences. 2018;4(Issue):1-21.

DISCLAIMER: The blogs are provided for informational purposes only. They are not a substitute for advice from your own healthcare professionals.

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