The NDP and Old Age Security
NDP leadership candidate Jagmeet Singh has proposed (with few details) to reform the current Old Age Security system by integrating Old Age Security (OAS) and the Guaranteed Income Supplement (GIS.)
“A Jagmeet Singh-led government will implement the Canada Seniors Guarantee to ensure that no Canadian senior has to live in poverty. The Canada Seniors Guarantee will combine a number of existing seniors’ benefits into a single, income-tested benefit. This includes Old Age Security (OAS), the Guaranteed Income Supplement (GIS), the Age Credit, and the Pension Income Credit. By adding the Age Credit and the Pension Income Credit, an additional $4 billion will be added to the core benefits provided by OAS-GIS.”
Here I offer a mildly critical analysis. Just to be clear, I think Singh is an excellent leadership candidate and he has put forward positions on other issues which I strongly support.
Currently, all Canadian seniors are (subject to a lifetime residence requirement) eligible to collect a monthly OAS benefit of $578. This is an individual benefit, and is only income-tested at high incomes. (OAS is phased out when individuals have an annual income above $74,000 and is lost completely at an annual income of $120,000 or more.)
The GIS is an income supplement for low income singles and couples. For couples it pays a maximum of $1140 per month, which is lost completely when the combined income of the couple exceeds $23,000 (not counting OAS income.) About one in three of all seniors qualify for some GIS.
While some progressives have been critical of creating a combined seniors benefit, it should not be rejected out of hand. The proposal is modelled on the current system of child benefits which was championed by anti poverty groups and is based on family income and slowly phased out to zero for high income families with children. As noted, OAS is already clawed back for very high income seniors. True universality (as used to be the case with family allowances for children and universal OAS) no longer exists. Some progressive social policy groups, notably the Caledon Institute, have favoured a seniors benefit as did, temporarily, the Chretien government. (They backed off under strong political pressure.)
Singh’s proposal to fold in the pension and age credit to OAS and GIS is progressive. And the impact of his proposal to integrate OAS and GIS would be more or less progressive depending upon the exact parameters. The intent is clearly to re-distribute fiscal resources from more to less affluent seniors and to counter the recent increase in seniors poverty, especially among single, very elderly women.
All that said, I favour retention of OAS.
We should bear in mind that the rationale for income transfer programs includes income stabilization and replacement for individuals, not just redistribution of family income. Traditionally, social democrats have favoured universal public pensions, paid for from taxes and premiums, and universal Unemployment Insurance coverage to cover individuals against the predictable risk of income loss due to old age, unemployment and disability (though CPP disability benefits are very meagre.) We have also generally accepted income-tested programs such as GIS and child tax credits which have an explicit anti poverty objective.
The current near universal payment of OAS (subject to income tax it should be noted) provides individuals with a predictable pension on top of CPP. CPP and OAS combined provide only a modest, predictable, inflation adjusted pension for life. If OAS were to be significantly rolled back for middle and higher income seniors, they would have to increase their reliance on costly and unpredictable RRSP savings. Individuals would also have to make savings decisions over their lifetimes in ignorance of what their incomes would be in retirement.
Further, there is an increasing trend for seniors over age 65 to combine public pension income with earnings from employment. The GIS claw back at modest income levels already punishes seniors who choose to work with high marginal tax rates. (Claw back rates should be reduced.) Integrating OAS and GIS would push the problem higher up the income scale.
We should also be careful about going too far in terms of family income testing. Women still have significantly lower annual earnings than men, and family income testing OAS would result in a loss of benefits for women depending upon the retirement income of a spouse
In conclusion, proceed with caution.
Clawbacks on GIS go as high as 92% at very low income while OAS clawbacks for higher income seniors go no higher than 15%. That’s a good place to start OAS/GIS reform.
Thank you for this, Andrew. It is useful. Concise and clear. Sadly, Mr. Singh’s glib proposal indicates a thorough lack of understanding regarding the historic role of means-testing, the depth and breadth of our Party’s history, the realities of so many, and an overreliance on bureaucratic solutions.
Leaving aside technical arguments, there is a strong political argument for maintaining the (near) universality of the OAS. We support universal programs because it is harder for the right-wingers to attack programs, like the OAS and Q/CPP, that nearly everyone draws benefits from than programs for the “poor”, as we have seen with that cuts to welfare and U.I., among others.
I have similarly been promoting since 2013 a gradual amalgamation of OAS & GIS
I have similarly since 2013 been promoting an amalgamation of the OAS & GIS programs into a single improved GIS program. Upon request, I can provide anyone with a copy of my related paper, to which is appended a spreadsheet that estimates cost savings of my proposal (i.e. about $9 billion reduction in OAS & GIS annual expenditures gradually over 40 years)
Mr. Dussault. Would you please email me your paper? I can be reached at firstname.lastname@example.org
I hope that there is major reform of the GIS and that there is a boost in benefit. The seniors that rely largely on the GIS are poor and this forces some to try to work and if work is punished, how on earth is that senior going to get out poverty? There should not be any clawbacks for GIS, especially at the low level until a gradual amount starting at LIM. Again, individual benefits, not family tested. That just messes anybody up that might not be retired but their spouse is.
I would also like to look at your paper Mr. Dussault. I work for BC Finance and have spent most of my career working on retirement income security issues. My e-mail is:
You make some very good points, Andrew.
I think the issue of the GIS clawback is a critical one that must be addressed.
There are many issues that continue to exist in the retirement income system, throwing into the mix the new elements that have been introduced (Additional CPP, PRPPs, TFSAs, regulatory reforms for pension plans).
So proceed with caution is a perfect concluding statement.
OASP is a given to hard workers like myself and Mr. Singh should understand this, just living in Canada for over 60 years should qualify you for this benefit.
I would also like to have a copy of your paper Mr. Dussault. my email address is email@example.com