Elizabeth Shilton is a senior fellow at the Queen's University Centre for Law in the Contemporary Workplace. She is a 2016 YWCA Toronto Woman of Distinction.
Every Monday morning, a Toronto daily newspaper publishes a set of tables showing data on financial issues such as interest rates, mortgage rates and the monthly annuity payments Canadians can expect from financial institutions. There we can gauge how the various rates may affect us, according to our age and stage of life. But most Canadian women never notice the annuity tables – we don't understand how annuities work and don't connect them to our day-to-day lives.
That's a mistake. Annuities are effectively pensions – monthly income streams purchased with retirement savings. Most Canadians do not have a decent workplace pension plan. For them, an annuity may be the best hope for a steady, predictable retirement income.
We should not ignore these tables, because we should be shocked at what they tell us. Week after week, they show that when it comes to the Canadian annuity market, women must pay a higher price to get the same monthly pension as Canadian men of comparable age. That differential translates into reduced comfort and – very likely – dignity for women in their retirement years.
Here's the reality behind the numbers, based on the table published Monday, May 2: A 65-year-old woman who gives $100,000 to a major insurance company will get an annuity of about $474 a month, while a man of the same age spending the same amount will get $519. A woman who waits until the age of 71 to buy her annuity will get $548 monthly, while a man of the same age will get $603.
This is not the case with the Canada Pension Plan, where men and women of similar ages, with similar contribution records, get the same monthly pension. It doesn't happen in registered workplace pension plans either, where gender-based monthly payments are outlawed.
But it happens when we take our own retirement savings to the annuity market, including RRSPs, TSFAs, the new PRPPs (pooled registered pension plans), and other savings vehicles.
How is it possible that financial institutions can provide a lower monthly return to women than men?
The insurance industry claims statistics justify sex-based annuity pricing; women live longer on average than men, thus collect their annuities longer. But the majority of women do not outlive the male average. The industry's reasoning – treating individual women less favourably than men on the basis of generalizations – sounds like textbook discrimination.
The insurance industry argues that it's impossible to distribute longevity risk fairly in any other way.
The European Court of Justice disagrees. Five years ago, the court ordered the industry to use unisex annuity pricing within the European Union. Why do we still permit a different practice in Canada?
Women contribute diligently to their RRSPs if they can, but their average contribution is about two-thirds of the average male contribution – not surprising, since women still earn only about 70 cents on the male dollar.
Women are less likely than men to have $100,000 to purchase an annuity. But if they can save enough to buy one, they should not have to accept smaller monthly pensions for their hard-earned dollars.
Politicians are currently debating how to manage the expected retirement-income shortfall for Canada's aging population. Options include providing more policy support for individualized financial products or expanding the Canada Pension Plan.
Under the first option, women's dollars buy lower pensions than men's; under the second, women's dollars have equal value. The public pension solution is clearly the equitable solution – let's choose it and support it.