With research showing that Canadian women are at greater risk of experiencing poverty during their senior years, the Healthcare of Ontario Pension Plan is asking policy-makers to address pension risks that leave the group vulnerable to financial instability in retirement.
As part of a research series that examines senior poverty in Canada, the pension plan noted, in its latest report, that women are more likely to have an inadequate retirement income than men because many of them work part-time, earn less on average, take career breaks in order to fulfil caregiving roles and generally have a longer life expectancy.
When people talk about longevity, they usually think of the Canadian population as a whole, notes Darryl Mabini, senior director of growth and stakeholder relations at HOOPP. But with women living longer than men, they may not benefit from a “catch-all” solution and should plan for their retirement differently, he says.
“So if you think about savings when you’re thinking of a solution for individuals and their retirement, it’s sort of not a one size fits all,” says Mabini, suggesting that even though women on average live only four years longer than men, the difference is still significant. “Say you have $20,000 of [retirement] income a year. That’s $80,000 of additional retirement savings you need to have for women versus men.”
While women are more likely to have access to defined benefit pension plans than men because of their presence in sectors such as educational services, health care, social assistance and public administration, the report noted certain factors still put them at a disadvantage.
For one, they’re more likely to take time off work for their family, says Mabini, suggesting the absences feed the large retirement income gap between men and women.
While some employers offer workplace pensions that allow employees to continue contributing to their plans during absences, others don’t, he says. And for those who don’t have an obligation to contribute to their pensions during a leave, the chance of them continuing to save for retirement is low.
“Generally speaking, defined benefit plans are mandatory,” says Mabini. “Think about women who have left work, say on maternity leave. If they’re part of a defined benefit plan, it’s good because there are options and many have features that allow them to contribute while they’re off. But if you’re in an RRSP, it’s not mandatory. You would probably push it down that priority list and most likely not contribute.”
In its report, HOOPP asks policy-makers to tackle the gender gap by considering several measures. They include ensuring plans provide members with adequate income replacement; have risk sharing as an important part of their model; are automatic and mandatory for employees; allow for pooling of individual savings so members have access to affordable investments and shoulder less risk; and have a simple decumulation process upon retirement.
Many Canadians find it challenging when they have to make decisions about what to do with their retirement savings, says Mabini, noting that a straightforward decumulation process with a steady source of income “takes the stress off” individuals.