Calls to “rein in” Old Age Security (OAS) — most recently from advocacy groups such as Generation Squeeze — raise legitimate questions about the cost of Canada’s retirement income system.
Old Age Security and the companion Guaranteed Income Supplement (GIS) are Canada’s most expensive social programs, costing $83.1 billion this fiscal year and rising to $100 billion by 2029-30.
As the federal government moves into an era of productivity-boosting investments and fiscal restraint, a thoughtful review of these programs will be needed.
But the fixes that advocacy groups propose are often blunt and divisive. Too often, they frame the issue as “young versus old” — a narrative that steers us away from genuine reform and toward headline-driven cost cutting.
What we need instead is an integrated social investment strategy that takes account of a full range of social, economic and fiscal factors. This will require looking at the full picture, examining not just what seniors receive, but what they pay, and how resources move from parents to their kids.
When we include all public spending and taxes, the main story isn’t “young versus old” at all. It’s the intended transfer through our progressive tax system from higher-income Canadians to lower-income ones. Research also shows that financial transfers between men and women are as significant as those between generations.
Such data point to potential opportunities for reform. For example, eliminating pension income splitting — which mainly benefits higher-income couples — would save public funds while preserving support for those who need it most.
Gradually raising the age of eligibility for OAS — as many developed countries have done in response to longer life expectancy — also deserves serious debate.
Or imagine a coordinated reform package: gradually raising the OAS eligibility age while also retaining full GIS-style benefits at 65 for low-income seniors. The new GIS portion would have fewer work disincentives by raising the amount that people could earn before benefits were reduced.
Or lower the OAS clawback threshold modestly as part of a plan that simultaneously improves housing and care options for lower-income seniors.
A thoughtful review should begin by asking some fundamental questions, such as:
- Are we balancing income support with essential services such as long-term care and housing?
- Do people in their 60s and 70s need the same kind of help as those in their 80s and 90s?
- Do current pension rules discourage older Canadians from working?
There’s no question that reform is needed. But Canada’s retirement income system — built around OAS, the GIS and the Canada Pension Plan — performs well internationally. It keeps most seniors out of deep poverty and provides a predictable foundation for retirement planning.
The task now is to strengthen that framework, not weaken it through piecemeal reductions.
Canada can afford to support its seniors; what it can’t afford is complacency or reactionary policy.
We should be building a system that works — fairly, sustainably and with a long-term vision of a strong Canada with a growing economy and a high quality of life for all.
John Stapleton and Peter Hicks are members of the Ottawa Council of Aging’s Expert Panel on Income Security.
I’ll be 70 in a few days. I haven’t yet tapped into my RRSP; I also have a fully funded TFSA, a house, and other savings. I’ve often wondered whether it’s fair to the Canadian taxpayer and the younger generation that I get OAS because of an income that I choose to keep low.
I doubt anyone would disagree with:
“We should be building a system that works — fairly, sustainably and with a long-term vision of a strong Canada with a growing economy and a high quality of life for all.”
The challenge, as always, in regard to pudding, is in the eating – the transitional execution resulting in unintended pains, etc.
It seems to me to be an excellent hypothesis – requiring exacting and exquisite execution, such that both the actual beneficiaries include the senior population AND the bureaucratic efficiencies garnered by a streamlined, generalized economic benefits program, which is essentially “automatically” conferred and applied in singular fashion, eliminating the complexities of niggling qualifiers, etc.
Careful, thoughtful, accurate transition to a much leaner, (bureaucratically), more just, equitable systems for “all”, require recognition of human equality, factual knowledge of lived experiences of the most powerful, as well as most vulnerable, with a view to “declassification” toward societal equitable integrity for all: beneficiaries, dependents, proponents, executors, managers, and enforcers of moral, ethical & legal justice.
A pretty weak proposal for authors who claim that Generation Squeeze (GS) and The Globe and Mail’s proposals are blunt and divisive.
What exactly is blunt and divisive? Almost every conversation around OAS reform is divisive, even the Bloc’s recent demand that seniors 65-74 get an additional 10% in OAS payments bothered people struggling with housing and income security. As Urback’s piece in the G&M highlighted, every attempt to reform OAS has been met with hostility and has failed.
Blunt may just be in the eyes of the beholder, but GS’s proposals to reform OAS would only impact a small portion of recipients, those with combined incomes over $100,000, and they would only receive some $3,000 less. The savings would go to boosting GIS, which would reduce the rate of seniors’ poverty in Canada, which is already the lowest among any age cohort.
“When we include all public spending and taxes, the main story isn’t “young versus old” at all. It’s the intended transfer through our progressive tax system from higher-income Canadians to lower-income ones.”
So show your work. If that’s the focus though, then wouldn’t you agree that wealthier older Canadian’s don’t need the full OAS amount when a couple’s combined income is $182,000 a year? This is the same group that is most likely to have their homes paid off, full TFSAs and other savings to rely on.
The pension income splitting idea is fine, but that’s not OAS reform.
Gradually raising the age of eligibility for OAS has been debated and defeated. Is it worth retreading? And this does nothing to improve the poverty rates of seniors. Remember, OAS is for security in old age, not a government handout just because you’re older. Sure, gradually raising the age would help, and keeping GIS available at 65 is smart, but again, we’ve been down this road — it failed, and it doesn’t address the pressing need or justify sending money to people just because of their age.
“Or lower the OAS clawback threshold modestly as part of a plan that simultaneously improves housing and care options for lower-income seniors.”
Put some numbers to it; this just looks like a soft version of what GS has proposed, they specifically say the savings should go to GIS, and affordable housing. How much should the clawback be lowered, over what period of time?
You know what would help an article like this? Recognition of the immense wealth held by those of retirement age, of their lower rates of poverty, of the cheap homes they bought and will one day sell for immense capital gains free lottery ticket level gains on the backs of working generations, and a reality check on what it costs to live today and confronting the fact that couples with $182,000 in income, not including any TFSA withdrawals, are receiving some $18,000 a year from current taxpayers, many of whom will never experience those low house prices, much lower rates of CPP contributions, and overall paid far less for retirees when they were working age. The dependency ratio has fundamentally shifted, as policy workers have known for decades, yet reforms were not made because the politics were too costly. More modest shifts were possible in decades past, but we’re past that point.