Documents reveal concerns, effects of CPP benefit limits for widows and widowers

Finance Minister Bill Morneau listens to a question during a news conference in the courtyard of a college in Ottawa on September 26, 2016. (Adrian Wyld / THE CANADIAN PRESS)

OTTAWA -- Sheila was 62 when her husband died.

For three years she continued to work full time as a nurse, collecting survivor benefits under the Canada Pension Plan.

When Sheila retired at age 65 and began collecting her CPP retirement pension, she bumped into the financial ceiling the government places on the amounts retirees can receive under the public pension scheme and the survivor pension disappeared.

Internal government documents show that the cap on benefits is a key complaint about the program that retirees want the government to address.

And one government evaluation of the Canada Pension Plan program shows that the cap on survivor benefits could be hitting retirees today harder than they have in the past.

Sheila asked to not use her last name for privacy reasons because her late husband was a police officer in Ontario for 25 years. His police pension and her own private pension has meant she has done OK financially, but the same can't be said of some of her friends. For them, she says, the cap remains a serious issue.

Federal Finance Minister Bill Morneau and his provincial and territorial counterparts addressed the problem when they agreed last year to increase the amount of benefits from and the premiums to be paid into the Canada Pension Plan.

The finance ministers agreed to lift the cap on benefits, but only on the so-called enhanced portion of CPP, which is to be phased in starting in 2019.

That means retirees like Sheila are stuck with lower benefits, unlike their counterparts 40 years from now, when the full financial benefit of the CPP changes will be felt.

"It just sort of seems unfair that that happens," the 70-year-old widow said, adding that her husband contributed to CPP "his whole working life."

Policy makers originally intended the survivor benefit to help a widow or widower support themselves and their children. Traditionally, this help was aimed at women who spent years as stay-at-home parents and weren't going to collect much for CPP because they hadn't contributed very much during their working years.

That would be the case for 81-year-old Joan Stinson. Joan spent years at home raising a family and receives $87 per month in CPP retirement benefits, her husband Robert said.

She and Robert, who is 83, rely heavily on CPP to pay the bills.

"It's quite a bit. We don't have any other pension plans going for us and we get by on what we get between the two of us," Robert Stinson said.

Sheila, on the other hand, receives the maximum retirement benefit each month because she worked full time as nurse for decades, reflecting a wider societal change that has also had an effect on the benefits paid out. Over the last 50 years, women's labour force participation rates have risen along with the amounts they receive under the retirement benefit. The unintended effect has been a reduction in their survivor benefits.

As well, the report says many families are no longer made up of a widow and dependent children as the number of re-marriages and blended families has increased.

The combined result has produced a significant decline in women's financial vulnerability since the CPP's inception, but not eliminated it completely.

"As the proportion of married/common law women who are currently in the labour force has (statistically) plateaued, there is little room for additional family income to compensate upon the death of a spouse," the report says. "For this reason, it is possible to see how family income might suffer from the death of a spouse more in the current socioeconomic climate than in the past."

The Canadian Press obtained a copy of the April draft of the evaluation report under the Access to Information Act.

The federal government alone can't lift the cap: any decision that affects CPP finances needs the consent of seven out of 10 provinces representing two-thirds of the country's population.