OAS a growing concern
Talk of change to old age pensions rings alarm bells
will jump from $35.8 billion to $107.7 billion.
However, any potential change is only under review at this point, according to Alyson Queen, a spokeswoman for the office of Minister of Human Resources and Skills Development Diane Finlay.
“Clearly, inaction is not an option. There are a number of things to review, and right now our focus is to ensure Canadians understand the situation we face as a country when it comes to demographics and when it comes to programs, like OAS, that are 100 per cent funded by taxes.”
Unlike the Canada Pension Plan (CPP), which is covered by a portion of the wages of Canadian workers, OAS is supported entirely by taxes. Newfoundland and Labrador Federation of Labour president Lana Payne suggested that may need to change.
“The labour movement has said we’re going to have somewhat of a pension crisis if we don’t deal with some of this, but certainly raising the age by which Canadians would be eligible for OAS and GIS (General Income Supplement) is not the way to solve what is basically a problem of saving that we have in the country.”
Her main concern regarding potential OAS eligibility changes is how it might effect seniors living on the edge of poverty.
“All we will do is penalize low income seniors or low income workers throughout their lifetime, because they’re really the ones who are not able to save.”
Ms. Payne would propose enhancing the CPP by requiring employees to divert more of their earnings towards it. She also made note of the fact the percentage of gross domestic product devoted to OAS and GIS expenditures in the years to come is projected to rise by less than a percentage point.
Numbers from the 10th OAS Actuarial Report back her claim. The expenditures as a percentage of GDP for 2011 is 2.4 per cent. That figure is projected to jump to 3.2 per cent in 2030 before dipping below three per cent in subsequent decades - 2.9 in 2040, 2.6 in 2050, and 2.4 in 2060.
“It’s not a huge jump when you consider other things are going to grow a lot more. I think there’s an attempt here to create fear that we have to absolutely do this because the Europeans are doing this.”
Ms. Payne said middle income earners could also feel a pinch. According to her, 63 per cent of all workers in the country do not have a company pension plan.
The issue of possible OAS changes has been the hot topic for phone calls St. John’s South-mount Pearl NDP MP Ryan Cleary had fielded.
“There’s this whole, for lack of a better word, panic. People are thinking, ‘ What is happening here? Can these changes be made this quick? Will we have a say?’”
Mr. Cleary indicated a debate on OAS needs to happen.
Bonavista-gander-grand FallsWindsor Liberal MP Scott Simms, who noted central Newfoundland has an aging population base, is of the same mind.
“I think it’s the biggest issue in my riding. If they’re going to starting raising the age of eligibility for OAS, you’re going to start seeing a bigger demand for welfare services and obviously loans, seniors residences, long-term care, and other things.”
Ms. Payne is surprised the issues did not come up in the last federal election and suspects some voters may have cast their ballots differently had they known the Conservatives intended to introduce substantial changes to OAS.
Ms. Queen acknowledged the federal government has no specific timeline for introducing changes to OAS. As for whether it may prove difficult to sell the public on a plan that may force them to wait longer for OAS, she said they need to understand the realities at play.
“To ensure tomorrow that seniors continue to receive their benefits, it’s important that we take action today so that the program reflects both our fiscal and demographic realities.”