Old Age Security (OAS) is the basic building block of Canada’s retirement security system. To qualify, people simply have to live their life in Canada. This means almost every Canadian senior benefits from a monthly OAS cheque for just over $500 from the day they turn 65.
The Guaranteed Income Supplement (GIS) is a sub-program of OAS specifically designed to eliminate senior poverty by paying benefits to seniors who fall below a low-income threshold. Shockingly, one in every three seniors, 1.7 million Canadians, currently receive GIS payments to keep them out of poverty.
Following a surprise 2012 announcement at a conference in Switzerland for world elites, Prime Minister Stephen Harper made major changes to Canada’s public pension system. His Conservative government changed the age of eligibility for OAS/GIS from 65 to 67, beginning in 2023. Canadians born after March 31, 1958 will now have to wait up to two years longer to receive payments from these public pension plans. This is the biggest cut ever made to Canada’s modest public pension system.
These are the 10 important facts about these damaging cuts that will make retirement unnecessarily more difficult for Canadians and could push hundreds of thousands of seniors into poverty:
1. OAS/GIS are incredibly important and effective public pension programs that should be preserved and expanded, not torn down. With one-fifth of all senior income in Canada coming from OAS/GIS, these programs are a crucial part of Canadians’ retirement security. We should be building on their success by expanding them and programs like the Canada Pension Plan, not cutting them. The Conservative choice to tear down our modest public pension system is a move in the wrong direction for all Canadians, particularly young people, who are rightly worried about their ability to save enough for retirement.
2. Middle class Canadians will lose $13,000 from their retirement funds. OAS currently pays about $6,500 per year from age 65. Losing two years of these payments will cost middle class Canadians (born after 1958) about $13,000 (in today’s dollars). These cuts will fall hardest on today’s young Canadians.
3. Hundreds of thousands of future seniors could be pushed into poverty. The government’s own numbers suggests OAS/GIS keeps one-third of Canadian seniors out of poverty. This is a remarkably effective program that is frequently recognized as one of Canada’s great social policy successes. But if the Conservatives’ cuts are allowed to more forward, estimates show that nearly 250,000 Canadian seniors will lose their GIS each year by 2030. The poorest seniors will lose about $32,000 (in today’s dollars) in retirement income. This means many more seniors will be living in poverty.
4. Conservatives made election promises to not cut public pensions. Conservatives did not mention any plan to cut OAS/GIS during the 2011 election, nor did they campaign on any plans to cut public pensions. In fact, their platform said “we will not cut transfer payments to individuals or to the provinces for essential things like health care, education, and pensions.” In previous federal campaigns, Conservatives had pledged to fully preserve OAS.
5. Claims that OAS is ‘unsustainable’ are misleading. Conservatives often argue that the OAS faces a ‘crisis’ and an impending ‘catastrophic collapse’ if their cuts were not imposed, saying the cost of the program will grow from $38 billion in 2011 to $108 billion in 2030, then reaching “unsustainable” levels. While these numbers are indeed the latest dollar-figure projections, Conservatives have taken them out of context. By 2030, Canada’s population and economy will have grown much larger, meaning government revenues will also increase. Inflation will also have eroded the value of today’s ‘dollar’ significantly. Using a simple comparison of 2011 and 2030 without accounting for inflation, economic and population growth is so misleading that it borders on outright lying.
6. The OAS is indeed sustainable. For a more accurate picture of the sustainability of OAS, we can simply look at the program’s costs over time as a percentage of Canada’s gross domestic product (or GDP, the size of our economy). Doing so compensates for the growth of the country’s economy, population and the declining value of our dollar over time, leaving us with a more meaningful comparison. Federal actuarial reports show that the cost of the OAS-GIS before the Conservative’s cuts was projected to increase temporarily from 2.4 per cent in 2011 of GDP to 3.1 percent in 2030. This is largely because of the temporary demographic bulge of the baby boomers and is much more modest then the ‘crisis’ portrayed by Conservatives. After 2030, the program’s costs as a percentage of GDP will begin a long-term decline (since the pensions paid tend to not grow as fast as the economy does). Contrary to Conservative fear-mongering claims, OAS/GIS doesn’t get less sustainable over time – it actually becomes more affordable.
7. We can afford the temporary increase in costs for OAS. Permanent cuts aren’t needed to compensate for an affordable temporary cost increase caused by the retirement of the baby-boomer generation. The real threat to federal government’s financial health is tax breaks for corporations and the wealthy. Corporate tax cuts and income splitting schemes, and the huge expansion of Tax Free Savings Accounts cost much more in lost federal revenues than his OAS-GIS cuts could ever possibly save. Conservatives are making a clear choice to cut programs for the most vulnerable Canadians to help the wealthy and protect the interests of corporations and banks.
8. OAS/GIS cuts were rammed through Parliament in an anti-democratic omnibus bill. The cuts to OAS/GIS were buried in the infamous 2012 omnibus budget bill – a massive 452-page bill that changed nearly 70 pieces of federal legislation, many not remotely related to finances or federal revenues. By abusing Parliamentary procedure, the massive bill was rammed through in less than 2 months. This was not nearly enough time for this incredibly detailed, complex bill to have been properly analyzed and debated. The NDP and the labour movement opposed the bill and called for it, at the very least, to be split into its component parts to allow elements, like the OAS/GIS cuts, to be examined separately. Conservatives refused. In an affront to democracy, the huge bill made it through this process virtually unchanged, with minimal discussion on the impacts of the OAS/GIS cuts.
9. Many seniors simply cannot work longer. While the life expectancy of Canadians is increasing generally, longer lives do not necessarily mean we can all automatically work longer. About one in four current retirees left the workforce because of ill health. Disability, family care responsibilities and the inability to find a job also prevent significant portions of seniors (primarily lower-income seniors) from working longer. Additionally, cutting a flat two years from all seniors is a much larger proportional cut for low-income Canadians, who will probably only receive OAS/GIS for about 9 years. This is compared to about 16 years for high-income Canadians, who tend to have a much longer life expectancy. Low-income Canadians therefore lose twice: they face a proportionally larger cut from a program that is proportionally much more important to them.
10. We can reverse the cuts. The cuts to OAS/GIS don’t begin to be phased in for another eight years. Thankfully they can still be reversed. Thomas Mulcair has pledged that an NDP federal government would return the OAS/GIS age of eligibility to 65, and would move forward with real action to help all Canadians retire in dignity and out of poverty by expanding the Canada Pension Plan.
Talk to your friends, family and neighbours about this issue. Do you want to lose $13,000 so Conservatives can give tax breaks to the rich and profitable corporations? Should future seniors face poverty? Should the next generations of Canadian retirees have a harder time retiring than those currently retired or about to retire?
Old Age Security and the Guaranteed Income Supplement are extremely effective programs to help keep Canadian seniors out of poverty. Cutting these pillars of our public pension program is the wrong direction for our country. Canadian seniors and future generations deserve better.