Anger rising over plan to reform OAS

Posted on February 2, 2012 in Social Security Debates

Source: — Authors: , -canada – More than 12,000 sign online petition; MPs getting earfuls
Posted: 02/2/2012.   By: Mark Kennedy and Joan Bryden

The political controversy over possible cuts to old age security grew even hotter Wednesday, as the Harper government’s critics vowed to fight the reforms and called on Canadians to rise up against them.

“This is an issue about at what point does the federal government take some responsibility about the status and position of the most vulnerable and needy people of our society,” said interim Liberal Leader Bob Rae.

In less than week, more than 12,000 Canadians have signed an online petition started by the Liberals and MPs have heard loud complaints from constituents.

Rae said Harper has created a “totally manufactured crisis” about the future sustainability of pensions. The government says the cost of the old age security (OAS) system, without reforms, will soar from $36.5 billion in 2010 to $108 billion in 2030.

But critics and experts have said that, in fact, when viewed as a ratio of Canada’s GDP, the increase in pension costs won’t be so stark and the system will be affordable.

“There is no cause for panic, and there is no justification for the kind of measures which the prime minister is talking about,” Rae told reporters. “This is the most clear example we can point to of where this neo-conservative ideology of Mr. Harper’s is driving this country, is driving our social programs.”

Rae said making Canadians wait until age 67 to collect OAS benefits would boost the cost of other support programs for low-income seniors and create a huge financial burden for provinces and municipalities.

Quebec Employment Minister Julie Boulet said such a move would have a negative impact on senior citizens and be a drain on the province’s coffers. She said the age hike would cost her province “tens of millions of dollars” in welfare payments to low-income seniors between the ages of 65 and 67.

Pension experts echoed opposition concerns.

Andrew Jackson, chief economist for the Canadian Labour Congress, said raising the age of eligibility for OAS to 67 would likely result in “a very significant increase” in poverty among seniors. And that, in turn, would increase the costs of social assistance, disability and drug programs for provincial governments.

Matthew Mendelsohn, director of the Mowat Centre think-tank, agreed.

“It certainly makes sense to have a real discussion about retirement ages and programs and generosity but stealth downloading of support from the federal government to provinces for low-income seniors… is going to put way more pressure on provincial governments that have real fiscal pressures and deficit challenges already,” he said.

Harper sparked a raging debate over OAS during a speech last week in Davos, Switzerland, when he said Canada’s public pension system needs a serious overhaul to remain financially sustainable as the population ages. Officials made it clear the government is targeting OAS.

While the government has offered no details, it is widely believed to be looking at boosting the age of eligibility by two years.

Finance Minister Jim Flaherty said Wednesday night the upcoming federal budget will not include changes to the OAS but changes are coming.

Rae said such a move would create a “domino effect” the government does not appear to have considered. He pointed out eligibility for the Guaranteed Income Supplement, an income-tested top-up for low-income seniors, is tied to eligibility for OAS. And qualifying for the GIS/OAS is tied to qualifying for provincial drug plans and other provincial and municipal support programs for seniors.

“He is not only dumping on the vulnerable senior citizens,” Rae told the House of Commons. “He is also dumping on the provinces, dumping on municipalities, creating a cascade of injustice because of a totally manufactured crisis on his side.”

Harper shrugged off the accusation, calling his assertions “nonsense” and “fear-mongering.”

Harper reiterated in the Commons Wednesday the planned changes to the pension system won’t affect today’s seniors or those close to turning 65.

“We will protect all of the benefits that go to seniors today,” said Harper. “A senior will not lose a single penny, nor one near retirement. What we are dealing with is people far off in the future who are very worried about their income security because they understand the pressures we are under. We are going to make sure the system protects them as well.”

That didn’t satisfy NDP critic Peter Julian, who said Canadian taxpayers have been “living by the rules” and are counting on a pension when they retire.

— Postmedia News / The Canadian Press


Canadian pension primer

THE future of Canada’s pension system is suddenly the hottest political issue on Parliament Hill. Here’s what you should know:

Q. What is old age security?

A. OAS is the centrepiece of the country’s public pension system, funded entirely by government revenues. It’s available to any Canadian citizen or permanent resident who has lived in the county for at least 10 years. People qualify at age 65. The maximum payment is $540.12 a month for seniors with less than $69,562 in annual net income. The payment is gradually clawed back for those above that income threshold, until it disappears for those earning more than $112,772.

Q. What’s the problem?

A. Baby boomers are heading toward retirement, and there will be fewer Canadians in the workforce to pay taxes to government. Without change, says the government, OAS will balloon in size and cost — from 4.7 million recipients (costing $36.5 billion) in 2010 to 9.3 million people (costing $108 billion) in 2030.

Q. What’s the government plan?

A. Prime Minister Stephen Harper says he will make changes to the pension system to ensure its “future sustainability for the next generation while not affecting current recipients.” The government is tight-lipped on specifics, but pledges an “adjustment period” so reforms don’t hurt Canadians “close to retirement.”

Q. What are the options?

A. There are no final decisions, but the government is examining changing the age of OAS qualification — to 67 from 65. Conceivably, it could also remove inflation protection to OAS benefits, or lower the income threshold at which benefits are clawed back from people.

Q. What do opposition parties say?

A. They have pounced on the issue, promising to protect pensioners and blasting the Tories for not mentioning this plan in last year’s election.

Q. How could this affect you?

A. It depends on what your annual income is and how close to retirement you are. If you have a high income, OAS benefits probably wouldn’t factor into your retirement plans anyway. If you are much younger and earn an average income, expect to get less by the time you retire

Q. Will this affect the Canada Pension Plan?

A. No. It is a separate fund, available to Canadians who were in the workplace. It is actuarially sound and won’t be touched.

— compiled by Postmedia News

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