On January 27 Prime Minister Stephen Harper announced that changes would be made to the Old Age Security program. It appears the government is planning to gradually change the OAS system so that the age of eligibility is raised to 67 from age 65.
Opposition Liberals and NDP say such a move would financially cripple millions of Canadians.
What is Old Age Security?
The Old Age Security program was introduced in 1952. It is one of the cornerstones of Canada’s retirement income system. Benefits include OAS, Guaranteed Income Supplement (GIS), Allowance and Allowance for the survivor.
In 1965 the age of eligibility was dropped from age 70 to age 65.
Employment history is not a factor in determining eligibility for OAS. Only residency requirements have to be met. Full benefits are paid to those who have lived in Canada for at least 40 years after turning 18.
Partial payments are made to pensioners who have lived in Canada for at least 10 years after age 18. You can receive some benefits if you move outside of Canada and even indefinitely if you have lived here for at least 20 years.
Old Age Security is also income based. Clawbacks of the benefits paid start when income hits $69,562 and payments are totally eliminated at $112,772.
Is the Program Sustainable?
OAS is paid from general tax revenues. It is estimated that by the year 2030 the number of seniors will climb to 9.3 million. Life expectancy has also risen by about 20 years since inception.
The program now costs about $4.7 billion and could almost triple to $108 billion in the years to come. The PM apparently wants to ensure the sustainability of our social programs that will become stretched thin by increasing numbers and longer lives.
Susan Eng, Vice President of Seniors Advocacy, is a spokesperson for CARP. She claims that this is the wrong time and the wrong target. The government could have made changes to the program many years ago.
Pensioners have paid their taxes and expect to have this income supplement.
Many people will have to work an extra two years or struggle with a limited income without this safety net.
Personally, I would suggest reviewing the gold-plated MP pensions first.
It remains to be seen what will be decided. One thing is for sure; if these changes are enacted, practically everyone’s retirement plan will have to be reviewed and probably adjusted – work longer, save more, or live on a reduced income.