The case for OAS reform

Human Resources Minister Diane Finley made her appeal for Old Age Security reform yesterday in Toronto. The Globe, Star, Postmedia and Canadian Press have their takes.

Here is the final third of the prepared text for her remarks, with all the usual caveats about checking against delivery (a full video of the speech hasn’t yet appeared online).

And now, the favourite topics of late, CPP and OAS.

The Canada Pension Plan is based on contributions. You work – and you and your employer contribute. The short story is that CPP is rock solid, based on the Chief Actuary, for at least 75 years. It’s an international model for sound structure, governance and long-term stability. Major changes to the CPP were made in the late 1990s to align it with the new realities of an aging population. That’s why it’s in such healthy shape.

The Old Age Security program however, is a very different story. OAS is available to all Canadians, funded 100 per cent by tax dollars. There is no reserve fund. There have been no such adjustments. It’s ticking along as if things haven’t changed demographically in fifty years.

People are living longer however and they are collecting OAS benefits over a longer period of time. A person turning 65 today can expect to receive OAS for 20 years – 4 years longer than in 1970. Add to that, the baby boomers are retiring in growing numbers. So we will have more people, collecting longer. As a result, the total cost of benefits will be increasingly unsustainable for tomorrow’s workers and taxpayers.

And it’s the next generations of Canadians who will have to shoulder the burden. The next generations who will have their own families to raise, their own mortgages to pay, their own student and household debt to manage.

OAS expenditures – which are the largest single transfer we pay to individual Canadians – are projected to increase from $36.5 billion a year to $108 billion a year by 2030. So the cost is going up dramatically – while the supply of workers who keep our economy growing and our tax revenues strong, is shrinking proportionately.

Ladies and gentlemen, inaction is simply not an option. Something must be done.

Nearly every OECD country has taken steps to ensure the sustainability of their public pension system, including the United States, Australia, United Kingdom, France, Germany, Sweden, and Japan. Whatever the Opposition may believe, this is not a crisis that we invented. Our population is aging, demographics are shifting. And it’s real.

It is clear that they are not interested in facing reality. It is clear that they are not interested in proactively discussing Canada’s longer-term challenges and opportunities. Their irresponsible approach to Canada’s finances would put many cherished programs at risk. As one editorial recently stated, the Opposition parties’ efforts to panic Canadians are as disingenuous as they are dangerous.

So let’s be frank.

We cannot allow ourselves to be pegged into a situation where we are faced with a choice between the country’s financial security… and our commitment to aging Canadians who have worked long and hard to build this great nation. This government will not allow that to happen.

There have also been many debates on the notion of sustainability.

Let me put that in a new context today. Everything is sustainable… if we selfishly choose not to think beyond our generation. Everything is sustainable… if we pretend other programs won’t be affected by a greying Canada. Everything is sustainable… if we decide to ignore a shrinking tax base to pay for our programs. Everything is sustainable… if you believe the solution is to massively increase taxes and incur huge structural deficits.

By that definition, we could say that despite their current predicaments, the programs of many of our European friends are ‘sustainable’. I don’t think I need to continue. The point is clear.

Government debt and inaction and complacency can choke an economy, as Canadians can see by looking abroad. Thanks to the strong economic leadership of our Prime Minister and Minister of Finance, we have the financial independence to make choices on our own terms. However, I cannot stress enough that if we want to continue to have choices, we need to start making responsible and prudent decisions today.

I’m sure many of you have heard this from me many times over the past few weeks, but I want to reinforce – again – that any changes being considered will not cost current seniors a penny. I challenge you to walk away today… and tell your older friends and family that I personally assure there will be no changes for seniors currently collecting benefits. Nor will there be any impacts for anyone close to retirement. Any necessary changes will be made with a substantial notice period, allowing plenty of time for Canadians – some of you here today – to adjust your retirement planning accordingly and prepare for the future.

Let me confirm right now that our Government will ensure the security of retirement benefits for Canadian seniors and for future generations. We owe it to future generations to leave a solid OAS program that is affordable and that reflects the demographic changes happening in our country.

I think it’s also important to bluntly say that we would not be considering change for the sake of change. We are considering change because it is in the best interest of Canadians, their families – and their futures.

This is a topic of great interest to Canadians. I’m hearing it loud and clear. Yet I have to tell you, that Canadians get it. Once they have a chance to absorb the information and realize just how different our country and our labour market will look in very few years… they understand.

Of course, I’m also being asked regularly for details, on what we’re planning. Although there is no policy yet to announce, I can tell you that the upcoming Budget will ensure steps to protect retirement income. It will also ensure that there are no cuts to the current benefits for seniors.

As our Prime Minister has said, our Government will make the changes necessary to sustain economic growth, job creation and prosperity. Now is the time for leadership to ensure Canada is indeed a country for all ages – for youth, for seniors, for our newcomers… and all of us in between.

Yes, we have our challenges. But just remember that nearly 150 years ago, we still had challenges – just different ones. Because of the commitment and vision of a small group of people, Canada became a country. Fast forward to today, and this country is now a world leader. To me, it’s the very best place in the world. Here you are given opportunity, freedom, the chance to work hard, raise a family and make a better life. And now we must look to tomorrow and prepare for it.

Our Government will make sure Canada is left a better, stronger place. Both for Canadians today and for the generations coming behind us.




Browse

The case for OAS reform

  1. “And it’s the next generations of Canadians who will have to shoulder the burden. The next generations who will have their own families to raise, their own mortgages to pay, their own student and household debt to manage.”

    I agree that it’s unfortunate that we’ve had a socialist government for the past 6 years who have made economic conditions significantly worse for our children and grandchildren.

    Feb 2011 iPolitics:

    Federal program spending during Martin’s final year in power — 2005-2006 — stood at $175 billion. By 2009-2010, under Harper, it had climbed to $245 billion.

    Greg Weston ~ CBC News:
    A federal agency created by the Conservative government to mediate complaints about Canadian mining operations abroad has spent more than $1.1 million in the past two years, but has yet to mediate anything.

    As CBC reported recently, the Employment Insurance Financing Board is supposed to invest surplus EI funds — except there aren’t any. And the Public Appointments Commission bureaucracy lives on years after it was scrapped.Altogether, the three agencies are costing taxpayers millions of dollars a year.

    • You chose to compare a year (2005) when surpluses were plentiful, GNP was growing, and unemployment was low, with a year (2009) that was the year after a global financial meltdown that called for, almost universally, a rapid increasing of government spending to offset a major Depression.
       That may have had something to do with the increased spending.

      • That was pre-Harper, when we had surpluses and a tax base to support Canadians. Harper pretty well trashed that with his tax cuts and drunk-sailor spending spree. Go ahead and square the circle.

        • I don`t see how your partisan ramblings are helpful.
          However, since you have chosen to invoke Harper`s name into the global  financial crisis of 2008 that spread to Canada and resulted in a need to stimulate the economy with increased gov`t spending, maybe you could point out the members of the opposition parties who spoke out in opposition to this spending spree.

          • Harper agreed to the ‘spending spree’ at a G20 meeting with Dubya. 

            The Opposition had nothing to say about it.

          • They’re not partisan — just saying, Harper cut the GST 2% so you could
            get a discount coffee at Timmies. I hope you feel it was worth because
            he pretty well trashed any reserve that Canadians had to advance his
            personal agenda.

      • “You chose to compare a year (2005) when surpluses were plentiful …. ”

        Cons have increased debt that our children and grandchildren are responsible for even tho they know perfectly well that stimulus doesn’t work. Cons have loaded up debt to buy off electorate, it is a bit late to be lecturing others about children’s future. If Cons are worried about children’s future, why are they making them pay for seniors retirement today while denying them same benefits when they retire? 

        Hill Times ~ Nov 2011:I

        n its first year of power, Prime Minister Stephen Harper’s (Calgary Southwest, Alta.) government increased spending by 6.3 per cent and continued increasing until 2010, when it went down by 1.36 per cent. Between 2006 and 2010, government spending increased by $48-billion, according to the Public Accounts of Canada. In its first year the Conservative government had a $13.8-billion surplus, and in 2010 posted a $33.37-billion deficit. In total, revenues during the same period grew only 0.46 per cent.

        In comparison, former prime minister Jean Chrétien’s government from 1994 to 2003 increased spending by 9.8 per cent while revenues grew 46.96 per cent. Mr. Chrétien inherited a $37.47-billion deficit when he took power. In 2003, the government posted a $9-billion surplus.

        Under Paul Martin, the government increased spending 10.85 per cent in 2004, but decreased it by 0.49 per cent in 2005 while revenues continued to grow.

        • Thanks for taking the time to do the research Tony.

          • my pleasure  

        • If everyone is in agreement that it was a good thing that Chretien reduced spending in the 1990`s, using varied methods, then why is it not a good thing that today`s government is using varied methods to reduce spending?

          The above question is not meant to be an opportunity for the usual residents to vent their Harper-Hating rage.

          • Fine — I’ll let someone else have a swipe at your low-hanging fruit.

          • I don’t believe government is going to decrease spending. Cons have added an astonishing amount of debt and expenses in their 6 years and it’s their financial mismanagement that puts us where we are today. 

            What’s happening now is that government spending keeps increasing even tho government is cutting services and welfare payments. Canadians pay more and more for less and less. 

          • Yes, I’m afraid the various methods are all social spending cuts.  Things like OAS, the environment, and improved equity for more marginalized citizens.  But at the same time, spending is continuing unabated on advertising, military spending, this stupid religious freedom office, cabinet, and communications officers.

            I’m not averse to some cuts coming to OAS, the environment, and improved equity for more marginalized citizens, as long as those cuts are as small as possible because I believe we need to stop spending beyond our means. 

            But this, lopsided version of austerity, which is basically saying “everybody tighten your belt except us” is not compassionate, it is not equitable, and it is not right.

  2. Where IS the analysis that establishes the projected fiscal gap will be unmanageable, anyways?

    Someone planning on freezing our GDP from now until then or something?

    • Analysis, lol.

      Next you’ll be asking for “evidence”.

      You slay me, you really do.

      •  Yeah I know.  Low hanging fruit but I kinda was hoping there was a spreadsheet or a napkin out there somewhere to whet my whistle on.  Everyone needs a hobby.

  3. oops

  4.   “except there aren’t any”

    There were but Martin spent it and Harper made it impossible to pay back.

  5. And the attendees were muzzled by the PMO — ”
    A less partisan view surely would be forthcoming from the students
    arrayed at the luncheon, the ones targeted again and again by Finley,
    the ones she told to pay attention because this policy is aimed at their
    generation.

    This must have come as a great relief to the lucky students for whom
    Finley had so much concern, the ones who will be given enough time to
    rearrange their retirement plans so no one else in the room will have to
    worry in the short term.

    But, alas, we will never know.

    The students from Jean Vanier Catholic Secondary School of
    Scarborough, used so expertly by a minister with a message, were barred
    from talking to the media.

    We don’t know about their retirement plans, but they have already been taught a lesson on message control.”

    http://www.thestar.com/news/canada/politics/article/1134754–tim-harper-diane-finley-sells-old-age-pension-changes-to-the-young?bn=1

    • How, exactly, were the students barred from talking to the media? Did they have to sign something before they were allowed in? What happens to them if they speak to the media? I have to say I find this rather strange.

      • I honestly don’t know. I only posted the article. Why don’t you fire off an e-mail to the authour, Tim Harper, and ask him if you really need to know.

        • I didn’t really expect you to have an answer. I suppose mine were rhetorical questions expressing my astonishment that they were able to prevent secondary school students from speaking to the media. No offense intended.

          • No offense taken. Have a nice day.

  6. These are people used to doing a kitchen-table budget for a family…..they have no idea how to do a budget for a country, and it’s a hugely different matter.

  7. I appreciate that she used the relevant statistic, that of the difference in life expectancy from 65, rather than from birth.  I agree completely that the mountain of baby boomers followed by the valley of the next generation does mean that they will have to pay more for less–which isn’t fair under any scenario. 

    I take issue with the assertion it is the Opposition parties inducing panic.  What kind of government announces (in foreign lands) some great plan, but gets home and forgets what it is.  Then, remembers it has a great plan, but will only say those currently receiving it are safe–in spite of repeated questions on what year this will go into effect, will it be phased in gradually, will it be dependent on any other requirement (such as the need for guaranteed income supplement), who will pay the increased costs of other (read: provincial) social safety nets, if any are needed, etc. etc. 

    I mean, usually if you have a plan, you have the bulk of the details worked out–at least for discussion purposes.  This coy, “we are the government, trust us” thing is just plain stupid–and it scares most of us far more than any actual answers could do, I think.

  8. “OAS expenditures – which are the largest single transfer we pay to
    individual Canadians – are projected to increase from $36.5 billion a
    year to $108 billion a year by 2030. So the cost is going up
    dramatically”

    Won’t they stop putting out the 36 to 108 comparison? Hasn’t everyone realized you can’t compare 2012 dollars directly to 2030 dollars?

    • According to the last election results, you can fool 39% of people some of the time. 

      • You mean the 27% that voted for Harper.

        • Maybe he means the 11% who voted for Ignatieff.

          • No he doesn’t and you know that.

  9. Alrighty then.

    So she compares us to nations who are cutting their pension plans “including the United States, Australia, United Kingdom, France, Germany, Sweden, and Japan” yet she doesn’t mention that even their reduced plans are generally more generous than ours?

    We’re not in massive debt like them either, and our economy is still growing even during this downturn.

    Then there’s the issue of comparing 2012 dollars to 2030 dollars.

    Then there’s the issue that the time delay means that a good portion of those causing this bulge will not see their payments reduced by age anways.

    Then there’s the issue of picking the highest point in the time graph as your basis point.

    Then there’s the fact that they’ve ignored their own ability to claw back some of those benefits from people earning $60K or more a year.

    Frankly I’m not sure why this is the issue they’re expending so much political capital on.

    • “So she compares us to nations who are cutting their pension plans “including the United States, Australia, United Kingdom, France, Germany, Sweden, and Japan” yet she doesn’t mention that even their reduced plans are generally more generous than ours?”

      So this makes her point that the listed countries have already done what her government is proposing for our OAS system invalid somehow?  As for their plans being more “generous” (which I would certainly dispute), perhaps that’s why they reduced them before us.

      “We’re not in massive debt like them either, and our economy is still growing even during this downturn. ”

      Our debt is plenty massive enough and even if our economic growth is sufficient to fund social spending at current levels indefinitely, it is does not mean government fiscal policy should be written in stone today.

      “Then there’s the issue of comparing 2012 dollars to 2030 dollars”

      So what exactly would the comparative figures be in, say, 2030 dollars.  I’ll give you the benefit of the doubt that the ratio would be greater than 36M/108M.  Does it make a difference to you if it’s closer to 50M/108M or 60M/108M?

      “Then there’s the issue that the time delay means that a good portion of those causing this bulge will not see their payments reduced by age anways.”

      So you anticipate the plan Harper finally tables will not actually reduce the cost of OAS at all, that in essence this is all a big joke?

      “Then there’s the issue of picking the highest point in the time graph as your basis point.”

      Isn’t that exactly the right point to pick when redesigning a social spending program? 

      “Then there’s the fact that they’ve ignored their own ability to claw back some of those benefits from people earning $60K or more a year.”

      What makes you think they’ve ignored this?  I’ve not seen anywhere that the current rules that clawback OAS are going to change.

      • “So what exactly would the comparative figures be in, say, 2030 dollars.”

        Oh FFS. If you don’t even understand this rudimentary piece of economics, well, then you probably wouldn’t have written this comment at all.

        If you have to ask, then you don’t understand. Don’t give us the “benefit of the doubt”, just go learn it for yourself and – god willing – come back with an understanding of the basic issues.


      • “Then there’s the fact that they’ve ignored their own ability to claw back some of those benefits from people earning $60K or more a year.”

        What makes you think they’ve ignored this?  I’ve not seen anywhere that the current rules that clawback OAS are going to change. 

        Didn’t you just answer your own question?  

        Isn’t the fact that no one in the government is talking about changing the rules on OAS clawback at least circumstantial evidence that they’re ignoring the fact that they could change the rules on OAS clawback?

        You seem to have just attempted to counter Phil’s argument that the government is ignoring X with the statement “The government isn’t even talking about X”.  I mean… what???

  10. OAS is available to all Canadians

    Didn’t take me more than the second sentence of the second paragraph to get to a line that’s not true.

    Among the Canadians to whom OAS is not available are me (or, at least, me at the time in the future when my eligibility for OAS will be determined).  Other Canadians to whom OAS is not available:  DIANE FINLEY.

    Which is not to suggest that politicians can’t argue in favour of cutting benefits that they’re not eligible for anyway (because they make too much money), but simply to say that if you’re a politician, and you’re arguing in favour of perhaps cutting a retirement benefit that you yourself are too well-off to receive under the current structure, you really need to be transparent about that fact.

    I don’t begrudge Minister Finley her $233,247 salary, but I think it’s important that she acknowledge that OAS is NOT available to all Canadians, and that she herself, for instance, has a salary more than DOUBLE the current OAS cut-off of $110,878.

    • Your points are valid, but Ms. Finley’s brevity (“OAS is available to all eligible Canadians) is, in general, to be preferred to the alternative.

      • Especially since it supports a handy government narrative, no?

        A false narrative, sure, but useful just the same.

      • I don’t understand this comment at all.  Is it sarcasm?  If it’s sarcasm, fine, but I’m still not sure I get it.

        You aren’t seriously suggesting that it was better for Finley to say something that isn’t true, than it would have been to tax herself unduly with the strain of adding the word “eligible” to her sentence, are you???

  11. Every time a Tory mentions France raising their retirement age I want to scream.

    Yes, France is going to raise their retirement age.  From 60 to 62!!!

    • Greece, on the other hand, is potentially going to have to raise its retirement age to “never”.

      • We ain’t Greece.

  12. If Finley wants to reduce OAS payouts, she should run the program through her EI call centre. That oughta clog the machine up a bit…

    • That might just work.
      Since there is a proportionatley large number of youth in the Unemployment lines, they would appreciate being told that when and if they find a full time job they will be asked to pay increased income taxes from their meagre salary to fund an OAS program for retired people that top up their pension plan income, as well as their CPP and RRSP`s.

      • Or we could just transfer the calls to Toews’ and MacKay’s Ministries and they can explain why jails and jets are more important than having a meal on the table.

  13. Is it possible that what we’re not getting is that the Tories are trying to subtly warn us that they expect Canada’s GDP to flat-line for the next 20 years or so?

  14. TJCooke wrote:

    “Oh FFS. If you don’t even understand this rudimentary piece of economics, well, then you probably wouldn’t have written this comment at all. ”

    I expect I understand this rudimentary piece of economics far better than you, assuming your understanding of economics does not exceed the reading comprehension skills you’re displaying in your response.  
    Yet another reminder I shouldn’t assume too much of certain of the posters on this blog.

    My post was an invitation to the OP to back up his assertion that converting figures to “2030 dollars” would somehow negate the government’s assertion that OAS changes are needed.  The “benefit of the doubt” I was prepared to grant was that the converted numbers would make the need for OAS changes less stark, though I highly doubted the need would disappear.

  15. LKO wrote:

    “I don’t understand this comment at all. Is it sarcasm? If it’s sarcasm, fine, but I’m still not sure I get it.”

    I was only suggesting that you chose a pretty innocuous example (Finley said “all Canadians” when she should have said “all eligible Canadians”) to illustrate your point about transparency.  Not your finest work.

    • WHAT???

      Claiming that all Canadians are eligible for something that not all Canadians are eligible for is just an innocuous example???

      That’s ridiculous.  All Canadians think that’s idiotic.

  16. LKO wrote:

    “Isn’t the fact that no one in the government is talking about changing the rules on OAS clawback at least circumstantial evidence that they’re ignoring the fact that they could change the rules on OAS clawback?”

    The reason (I suspect) no one in government is talking about changing the rules on OAS clawback is that it is not a part of the OAS system that needs changing.  In particular, it is already in place and indexed and kicks in at a level that I suspect seems reasonable to most.  There is therefore no need to expend additional political capital changing it.

    • 60K+ as the beginning of the clawback for an individual, when the average income for an individual is around 40K seems reasonable to you?

      For comparison, the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100—up from $48,300 in 2011.

      According to the ARC “The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.”

      Wouldn’t it make more sense to set the OAS clawback to start at that amount?

      • Regardless of whether it made more sense to lower the clawback threshold, I think it would burn up a lot of political capital unnecessarily, as the “if it ain’t broke, why fix it” criticism would kick in.  Besides, I don’t know what relevance the earnings cap for CPP contributions has to the appropriate income level of a senior whereby OAS should begin to be clawed back.

        • Regardless of whether it made more sense to lower the clawback threshold, I think it would burn up a lot of political capital unnecessarily, as the “if it ain’t broke, why fix it” criticism would kick in. 

          Whereas the idea of raising the age of eligibility from 65 to 67 has been smooth sailing???

  17. Here are some sobering thoughts about pensions.  While marginalized Canadians struggle with making ends meet, MPs having to worry about.  Consider this:  

    The”$5.80UtoU$1.00″taxpayerUtoUMP”contribution”ratio”officially”reported”by”

    the”federal”government”massively”understates”the”real”contribution”and”

    payout”ratios.”"

    • This”report”details”how”for”every”$1.00″that”MPs”and”Senators”pay”towards”

    the”soUcalled”“pension”fund,””taxpayers”contribute”$23.30.”

    • Qualified”MPs”currently”serving”will”be”eligible”to”collect”an”average”pension”

    of”$54,693″a”year”in”2015″in”addition”to”a”minimum”$78,800″in”oneUtime”

    severance”payments”for”those”not”qualified”or”old”enough”to”collect.”

    • If”each”of”them”are”reUelected”in”2015,”the”current”Parliament’s”MPs”would”be”

    eligible”to”collect”an”average”pension”of”$65,000″a”year”in”2019″in”addition”to”

    a”minimum”$78,800″in”oneUtime”severance”payments”for”those”not”qualified”

    or”old”enough”to”collect.”

    The$Big$Totals:$$262$million,$$436$million$and$$227$billion$

    $

    • If”currently”serving”MPs”were”to”leave”Parliament”in”2015,”they”would”cost”

    taxpayers”$11.2″million”a”year”in”pension”payments,”adding”up”to”$262″

    million”by”the”time”each”of”them”reaches”age”80.”This”is”in”addition”to”oneU

    time”severance”payments”of”$15″million.”"

  18. hello everyone i recently visited greece and when talking to the people on the street the unrest over there is alot like what is starting to arise here in canada. please check it out for yourself like i did. do not trust the media it is not a fair source of information anymore. what i am told by people on the streets in greece, is they will change there pension and reform to fix the problems in greece, if the greece goverment workers have to as well. the government of greece will not conform to this but the people must. to me this sounds like whats starting to happen in canada. you the people must conform and here is what is going to happen and we the government will look at our pensions and decide at a latter date if we are going to make reforms to our pensions. come on i can tell you the answer the government is going to come up with with there pensions i dont need to wait, but ours have no choice this is the way it shall be signed your canadian government. me myself feel we should all as canadians no matter what standing in life be responsible and we should all have to change to meet the troubling time ahead. we as canadians without standing must find a way like they did in british columbia to reverse this action through signatures and complaints to our mps to get this reversed. and have all the people of canada treated equally under this reform to the pension and put in writing for all not just the few that can least afford it .this sounds alot like greece without saying directly to the people of canada we are not going to do anything with the goverment pensions in canada. if anyone knows a way to stop this from happening please let us poor people know so we can stop this from happening.and we can get ALL canadians to chip in so it will not cost us poor people so much

Sign in to comment.