OAS, the Budget and the Baby Boomers

The Budget justifies raising the age of eligibility for OAS and GIS on the grounds that  the long-term fiscal sustainability of the program is being undermined by rising life expectancy.

No estimates of savings are provided. They will be very modest.

Given that average life expectancy at age 65 is 20 years, raising the eligibility age by two years could only save a maximum of 10% of projected spending on future retirees if implemented immediately.

However, the government proposes to phase in the increased eligibility age between 2023 and 2029 which will hugely reduce any savings relative to current projections.

According to the latest OAS Actuarial Report, OAS/GIS expenditures will rise from 2.43% of GDP today, to a peak of 3.16% in 2030, immediately after the full impact of the raised eligibility age kicks in in 2029.

OAS/GIS expenditures will already have hit 2.91% of GDP in 2023 when the phased in increase begins.

Put another way, the increased eligibility age will not impact most baby boomers. The impact will be on later age cohorts.

I fail entirely to see how the goal of inter-generational fairness is served by undermining retirement income security for those aged under 54 today.

Indeed, in the name of fairness, people of my generation should be arguing that those who follow us get OAS at the same age as us.

Re increasing life expectancy, the fact that longevity at age 65 varies significantly by social class is ignored. The reality is that low income seniors, those most impacted by the change, have not shared the average increase in life expectancy which is highlighted in the Budget.

2 comments

  • I don’t suppose it would ever occur to Flaherty that perhaps one of the many reasons average life expectancy has increased may be partially attributable to workers opting for earlier retirement during the years prior to the all out assault by corporations on pensions.

  • CPP is a pension plan and if you paid into it you get a pension. OAS & GIS are supplemental benefit programs to assist at raising the income level of retiring/retired seniors that are basically poor.
    Here what is sad.
    Most people have not checked with the CRA to see what their pension estimates are. When they do they will be shocked. The CPP at its maximum payout is $1200 a month and that is if you have worked most of your life and you are 65 or in most cases 72. If you try to retire earlier at 60 you will probably get $580 a month.
    That’s right $580 a month. Twenty bucks more than a single welfare recipient in Toronto. Sad but true.

    Now for OAS/GIS.
    A lot of people are really in the dark about OAS/GIS and “who actually” qualifies for it. A LARGE number of people will NEVER qualify for the OAS and don’t even know it. YET. For example a lot of people (ie. a lot of Bell Canada employees) have taken VSP (Voluntary SEPARATION Program) and termination packages in the 1980′ and 1990′s..most of these convert into a LIRA (Locked in account ) and then to a RLIF..which then turns into an annuity. These scenarios translate eventually into the fact that you cannot get or qualify for OAS or any supplemental if you already have another source of guaranteed income. A lot of people don’t know it yet but once they access these packages at age 55.. they will soon find out. And there is going to be a lot of disappointed people who didn’t see this coming. Their former employers didn’t tell them about this and their fiancial advisors didn’t tell them of this either.
    I don’t know who did the financial estimates of future savings in deferring the OAS benefit..for the Finance Minister..but it is laughable and sad. More people in 2023 will be denied the OAS benefit that those who will qualify and get it.

    I think the real reason for this government’s action is that they really see OAS and GIS as “social/welfare” benefits ” and “supplemental welfare income” for old people and want to download it to the cities.

    I am surprised that they don’t see Employment Insurance Payments as “Welfare”‘. Maybe they do? And maybe there ia a future agenda to also download that responsibility to the provinces and cities. Time will tell.

    Hate being the bearer of bad news.

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