This week, the Liberals surprised many by voting against a Bloc Québécois bill to raise Old Age Security payments for Canadians aged 65 to 74.
A mere two years ago, the Liberals implemented a 10 per cent increase in Old Age Security payments to Canadians 75 and older — a move the Bloc is seeking to match for younger seniors with its latest measure.
In an equally surprising move, the Conservatives joined the NDP in backing the Bloc’s bill. Old Age Security and the Guaranteed Income Supplement together cost $69.4 billion in 2022-2023, and are projected to cost $101.3 billion in 2027-2028. It is unclear how supporting this measure furthers the Tories’ long-stated commitment to “Fix the Budget.”
Since the bill would require new spending, the Bloc will need to convince the Liberal government to get behind it for it to pass.
We hope the Liberals resist the pressure to do so. Old Age Security needs to be reformed — not expanded.
One of the principal problems with Old Age Security in its current form is that it does not address a targeted need. As this space has previously noted, some 7.3 million seniors currently receive Old Age Security payouts — out of a total of 7.6 million.
The problem is the program’s clawback thresholds are too high. Seniors aged 75 and older are eligible for the maximum payout of $785 a month if they earn less than roughly $82,000. That means someone collecting as much as $81,000 in income is entitled to $9,400 in Old Age Security each year.
Only seniors earning above $148,000 are entirely ineligible. And because the program does not look at family income, a senior couple who together earn as much as $296,000 could still be eligible for some Old Age Security.
Of course, many seniors have nowhere near this level of income. The government should — and does — help to ensure seniors of lower means can live with dignity.
But that is where the Guaranteed Income Supplement comes in. If the government believes low-income seniors require more help than they currently receive, it should consider raising the threshold for this program or changing its clawback rates.
Another worthy reform would be for the government to look at the family income of senior couples when determining eligibility for Old Age Security — a concept the government already applies to various other programs. Family income is considered for the Canada Child Benefit, the Canada Dental Care Plan, the GST/HST credit and, indeed, OAS’s sister program, the Guaranteed Income Supplement.
The income threshold for many of these programs is far less generous than it is for Old Age Security. For example, to be eligible for dental care, a family’s adjusted family net income must be less than $90,000. More shockingly, the Canada Child Benefit starts being clawed back if a family’s income exceeds a meager $36,500.
To be fair, Old Age Security payments are taxable while these other programs’ benefits are not. But that only mitigates the unfairness; it does not eliminate it.
Finally, it is worth noting that another benefit available only to seniors is pension-income splitting. Unique among income types in the Canadian tax system, seniors are permitted to allocate up to half of their pension income to their spouse.
This is an additional tool that seniors can use to structure their affairs to decrease income tax and maximize their Old Age Security payouts. It is unclear why this benefit is not available to younger Canadians generating employment income as well.
In short, there is much the federal parties could do to make Old Age Security more effective, affordable and fair. Simply increasing payouts to those who are already eligible misses the mark.
With an election approaching, it is a shame none of the parties have bold visions for fiscal reform or generational fairness — proposals we suspect Canadians of all classes could get behind.
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