Canada’s federal senior’s benefit regime should have been reformed decades ago. But, as it is with all benefit programs, people like their perks and don’t want them taken away. It takes a crisis before the taxpaying public will squawk loudly enough to embolden a government to make necessary changes.
Old Age Security (OAS) has reached just such a point, thanks to its enormous size as a budget item and its unjustifiable lack of income testing. A new advocacy organization called Generation Squeeze has rightly called out OAS for reform.
Unlike the Guaranteed Income Supplement (GIS), which gives a monthly benefit to seniors with low incomes, the elderly get OAS as a reward for living long whether they need the money or not. And some of them are living quite “securely” already–more so than most working Canadians.
When Canada’s Old Age Pension began in 1928, it paid $20 per month to those 70 years old or older. The program was rebranded as the OAS in 1951, which doubled its payments from 1952 forward.
A few years later, the Lester B. Pearson Liberals cranked up seniors’ perks in multiple ways. Canada Pension Plan (CPP) payments began in 1966, the same year the age of eligibility for OAS fell to 65 years of age. In 1967, GIS was introduced for low-income seniors.
Demographic and economic realities were so much different then. In 1966, the average life expectancy was 68.8 years for males and 75.4 for females. Today, males are expected to live 79.9 years and females 84.0 years. As of 2023-24, 17.4 per cent of the Canadian population received OAS.
Also, eroding Canadian birth rates have left far fewer working people per senior citizen than six decades ago. This demographic wave and its associated costs were foreseeable long ago. Unfortunately, efforts at reform have failed.
For example, the Jean Chrétien Liberals proposed the Seniors Benefit in the 1997 federal budget. The new, income-tested benefit would have replaced the OAS and GIS and been offered to those as young as 60 years of age. The sensible proposal would have reduced administration costs and achieved $1.5 billion in annual savings by 2001 through claw backs on higher-income recipients. However, seniors’ groups, opposition parties, and even some Liberals opposed the plan, leaving it on the scrap heap of rejected good ideas.
In 2012, the Harper Conservative government announced that OAS and GIS eligibility would be raised to age 66 in 2020 and age 67 by 2023. The change would have saved taxpayers over $10 billion annually by 2023. Instead, Canadians handed power to the Trudeau Liberals in 2015, who, as promised, reversed the changes.
Since then, Canada’s fiscal house has been falling apart. Per capita economic growth has been near zero, deficits have soared, and net federal debts are somewhere past $1.36 trillion. Something has to give somewhere and the OAS is an obvious place to start.
Gen Squeeze makes a strong case to change OAS. It points out that seniors with a combined annual income of $182,000 are eligible to receive the full OAS benefit. They aren’t fully cut off unless their combined income is $297,000 (or $308,000 if they are 75 or older).
These income tests are egregiously high compared with those for non-seniors, even though seniors are less likely to carry mortgage payments. The median Canadian household income is just $74,200. And the average family with kids has benefits reduced once household incomes reaches $81,000.
A Research Co poll by Gen Squeeze found broad public ignorance on these facts. Once told, three-quarters of Canadian seniors supported a Gen Squeeze proposal to reduce OAS payments for couples with a combined income above $100,000 annually. Support was strong across political loyalties, also, ranging from 72 per cent for Conservative voters to 81 per cent for NDP voters.
Gen Squeeze says their plan would save taxpayers $7 billion, despite its inclusion of a proposal to increase funding for GIS. That is far more justifiable, as 400,000 seniors live in poverty and they need the help more than high-income seniors. Gen Squeeze also wants the Age Credit and Pension Income Credit removed from the tax code to save taxpayers an additional $7 billion.
While a few high-income seniors would feel the pinch from these changes, it would be a relief to younger working Canadians. As it is, largesse to wealthy seniors is paid for by deficit spending, saddling young Canadians with interest costs for the rest of their lives. That’s hardly fair, nor is it good for their financial security.
