I have heard from a number of constituents in response to the dis
cussion surrounding potential adjustments to Old Age Security.
I want to discuss some of the misinformation being circulated about proposed changes to Old Age Security. I think it is first important to make clear that, just as we promised in the recent election campaign, our Government is committed to protecting retirement income for today’s seniors, and for future generations of retirees. Canadians receive retirement income from a variety of sources, including the Canada Pension Plan and Old Age Security. The Canada Pension Plan is funded by premiums from each of our paycheques and it is on a safe, secure, and sustainable path. Old Age Security, on the other hand, is funded from general government revenue and is not sustainable in its current form.
ARE THESE CHANGES NECESSARY?
In 1975 there were seven working taxpayers for every senior. Because our population is getting older, today there are only four working-age Canadians for each senior. By 2030, the total number of seniors will nearly double, leaving only two working-age Canadians for each senior. Amidst these changing demographics, the annual cost of the Old Age Security program is projected to increase from $36 billion in 2010 to $108 billion in 2030. (That translates to increasing the current spending of 15% on OAS/GIS to about 25% of all government spending).
In short, the cost of Old Age Security is going up quickly and the number of working Canadians to pay for it is going down significantly. If changes are not made, the program will become unsustainable in the long-term.
WHAT ARE OTHERS SAYING?
It is not just our Government that is aware changes need to be made. Recently, a Standard and Poor’s report, Mounting Medical Care Spending Could Be Harmful to the G-20’s Credit Health, stated that “…age-related costs — pensions, health care, unemployment insurance and long-term care — would push Canada’s net debt to grow by 260 per cent from 2030 to 2050.”
And, using information from a report by Christopher Ragan at McGill, the MacDonald Laurier Institute calculated that “….by 2040 Canada would face a $67 billion deficit (in today's dollars) based on current policies and demographic change.” They went on to say that, “there can be little doubt that Canada, like all industrialized countries will soon face the full burden of an aging society. Canada will either proactively implement solutions to this coming problem or react, perhaps in crisis, when the full weight of the costs of an aging society fully confront our society."
The facts are clear: if we do nothing, OAS will eventually become too expensive and unsustainable. That is exactly why it is so important that our Government review these measures now so that pensions, and the seniors who rely on them, are protected in the long-term.
And even though they are currently pretending outrage, the Opposition is well aware of this. In fact, on December 5, 2011, Official Opposition Critic for Seniors, Irene Mathyssen held a roundtable to discuss the increasing seniors population in Canada and the issues that could arise from this. She stated "Issues facing seniors are only going to intensify as more Canadians reach their senior years... Action now is critical - we need a plan in place, we need the structure in place to deal with this dramatic shift in our country's demographics."
Failure to make important decisions now will put the program in jeopardy for future generations.
IS CANADA’S SYSTEM UNIQUE?
Countries who have already made changes to their systems include: Australia, Austria, Belgium, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Japan, Korea, Netherlands, Portugal, Slovak Republic, Slovenia, Spain, Turkey, United Kingdom, United States and Sweden.
WILL I BE AFFECTED?
I can guarantee you that any changes to Old Age Security will never affect anyone currently receiving benefits, nor will they ever affect any individual now nearing retirement. Other Canadians, who are not near retirement, will receive substantial notice of changes to Old Age Security, to ensure they have ample time to plan for their future.
I also want to explain some of the many important steps we have taken to support seniors, including:
• Increasing the Guaranteed Income Supplement for the most vulnerable seniors by $600 per year – the largest increase in 25 years. This measure improved the financial security and well-being of 680,000 seniors across Canada.
• Reducing taxes by introducing pension income splitting and increasing the age credit
• Introducing innovative new programs such as the tax-free savings account and the PRPP to help Canadians save for retirement.
As a result of our actions, seniors can individually earn approximately $19,000 per year or $38,000 as a couple before paying federal taxes.
Is making changes to OAS an easy decision to make? Of course not. Is it necessary? Without question. However, we are addressing the problem in a manner which will allow these changes to be gradual enough that no one should be left in crisis as a result.
In fact, in terms of reforming MP pensions my colleagues and I managed to make considerable changes to the system while we were in Opposition, saving taxpayers millions of dollars. Starting in 1993, my colleagues and I pushed for changes in the pension plan for MPs. We did manage to push the Liberal government to reduce its contribution from $6 to $3.60 (for every $1 contributed by individual members). The government also changed the eligibility for pension pay-out from simply six years of service to the minimum age of 55, and ended the practice of “double-dipping”.
Canadians gave us a strong mandate to protect and complete Canada’s economic recovery, and we are working to do just that. We will certainly be continuing to look at ways to cut spending and the Prime Minister has clearly indicated he has serious concerns about the rising costs of the country’s pension system.
Due to the current economic climate, our government is making every effort to continue to promote growth and fiscal responsibility. One of these actions is our plan to reduce the federal deficit in the medium term. In order to do this we are currently reviewing every form of government spending and making informed decisions on where changes can be made and savings can be found. We are finding savings without raising taxes or cutting transfers to the provinces to ensure Canadians’ priorities continue to be addressed.
With regards to MP pensions, all options are being considered as we review spending right across the government. Our Government is already leading by example and has frozen the wages of Members of Parliament and Ministers.