provides for most of the progressivity in the elderly benefits system. Over
the past few decades, these two programs have together played a central
role in significantly reducing poverty among Canada’s elderly.
Tax-Assisted Saving Plans
The OAS and GIS are programs that involve direct spending by the
government. The government also has important programs that require
no direct government spending but instead rely on tax-based incentives
to encourage individuals to save more for their retirement. There are
three types of programs: Registered Retirement Savings Plans (RRSPs),
Tax-Free Saving Accounts (TFSAs), and employer-sponsored Registered
Pension Plans (RPPs).
While the three programs have different features with regard to their
treatment in the tax system, they are all designed to provide some form of
financial incentive to individuals to increase their own personal savings
for retirement. A measure of success of these programs is the high
number of these tax-assisted savings accounts in existence. Over 50
percent of Canadian taxpayers contribute regularly to RRSPs and TFSAs.
One problem, however, is that Canadians with low incomes are not well
represented in this group and thus do not receive the considerable
benefits that accrue to middle- and higher-income Canadians.