Replacement Rates of Public Pensions in Canada: Heterogeneity across SocioEconomic Status

The importance of public pensions as an income source varies greatly according to socio-economic status. Using the Longitudinal and International Study of Adults, this paper analyzes how income replacement rates (RR) ensured by Old-Age Security (OAS), Guaranteed Income Supplement (GIS) and Canada/Quebec Pension Plan (C/QPP) benefits vary across socio-economic statuses. We compute and compare RR by socio-economic status, specifically considering the role of education, health, and living arrangements. The average RR provided by OAS/GIS is 32% for individuals in bad health, and 21% for those who report being in good health. Adding C/QPP benefits, these RR increase to 54% and 41%, respectively. We find that among couples, accounting for past income does not eliminate differences in RR by individuals’ characteristics. We argue that assortative mating plays a role in explaining RR variation across individuals’ characteristics.