Talk of change to old age pensions rings alarm bells
Lana Payne — File photo
Although how it will take shape is uncertain, already critics are raising concerns about how eligibility for Old Age Security (OAS) in Canada may soon change.
It has been widely speculated the Harper government is looking to raise the age of eligibility for OAS from 65 to 67.
In a speech last week at an economic forum in Switzerland, Prime Minister Stephen Harper mentioned changes he intends to introduce, including ones to unfunded retirement programs.
Government House leader Peter Van Loan later said OAS needs to remain “sustainable in the medium and long-term” in an interview with The Canadian Press.
According to the 10th OAS Actuarial Report, the number of OAS beneficiaries in Canada is expected to double from 2010 (4.7 million) to 2030 (9.3 million). Over that same time frame, total OAS and Guaranteed Income Supplement payouts will jump from $35.8 billion to $107.7 billion.
However, any potential change is only under review at this point, according to a spokeswoman for the office of Minister of Human Resources and Skills Development Diane Finlay.
“Clearly, inaction is not an option,” said Alyson Queen. “There are a number of things to review, and right now our focus is to ensure Canadians understand the situation we face as a country when it comes to demographics and when it comes to programs, like OAS, that are 100 per cent funded by taxes.”
Unlike the Canada Pension Plan (CPP), which is covered by a portion of the wages of Canadian workers, OAS is supported entirely by taxes. Newfoundland and Labrador Federation of Labour president Lana Payne suggests that may need to change.
“The labour movement has said we’re going to have somewhat of a pension crisis if we don’t deal with some of this, but certainly raising the age by which Canadians would be eligible for OAS and GIS (General Income Supplement) is not the way to solve what is basically a problem of saving that we have in the country.”
Her main concern regarding potential OAS eligibility changes is how it might effect seniors living on the edge of poverty.
“All we will do is penalize low income seniors or low income workers throughout their lifetime, because they’re really the ones who are not able to save.”
Payne would propose enhancing the CPP by requiring employees to divert more of their earnings towards it. She also made note of the fact the percentage of gross domestic product devoted to OAS and GIS expenditures in the years to come is projected to rise by less than a percentage point.
Numbers from the 10th OAS Actuarial Report back her claim. The expenditures as a percentage of GDP for 2011 is 2.4 per cent. That figure is projected to jump to 3.2 per cent in 2030 before dipping below three per cent in subsequent decades — 2.9 in 2040, 2.6 in 2050, and 2.4 in 2060.
“It’s not a huge jump when you consider other things are going to grow a lot more,” she said. “I think there’s an attempt here to create fear that we have to absolutely do this because the Europeans are doing this.”
Payne said middle income earners could also feel a pinch. According to Payne, 63 per cent of all workers in the country do not have a company pension plan.
The issue of possible OAS changes has been the hot topic for phone calls St. John’s South-Mount Pearl MP Ryan Cleary fielded over the weekend.
“There’s this whole, for lack of a better word, panic,” said the NDP MP. “People are thinking, ‘What is happening here? Can these changes be made this quick? Will we have a say?’”
Cleary said a debate on OAS needs to happen. Bonavista-Gander-Grand Falls-Windsor Liberal MP Scott Simms is of the same mind.
“I think it’s the biggest issue in my riding,” said Simms, going on to note central Newfoundland has an aging population base. “If they’re going to starting raising the age of eligibility for OAS, you’re going to start seeing a bigger demand for welfare services and obviously loans, seniors residences, long-term care, and other things.”
Payne is surprised the issues did not come up in the last federal election and suspects some voters may have cast their ballots differently had they known the Conservatives intended to introduce substantial changes to OAS.
Queen said the federal government has no specific timeline for introducing changes to OAS. As for whether it may prove difficult to sell the public on a plan that may force them to wait longer for OAS, Queen said they need to understand the realities at play.
“To ensure tomorrow that seniors continue to receive their benefits, it’s important that we take action today so that the program reflects both our fiscal and demographic realities.”