Best pension reform would be to take from the rich seniors

Posted on February 3, 2012 in Social Security Debates

Source: — Authors:  – business – Those making $50,000 don’t need benefits
February 2, 2012.   By Barbara Yaffe, Vancouver Sun

A much savvier political option for the Harper Conservatives than raising Old Age Security eligibility to 67 from 65 would be taxing back all benefits from all 65-plus seniors not decidedly low income.

If they do anything else, they will be pegged as mean-spirited and excessively ideological.

Because the truth is, Canada, while better off than most developed countries, continues to have a fair number of low-income seniors, mostly women – a group that inspires empathy from most Canadians.

The Stephen Harper crowd can rightly be criticized for some of their past policies in which they went out of their way to favour upper-income groups.

For example, the government has promised, once the federal budget is balanced, to allow income splitting for tax purposes for higher income Canadians.

It’s already providing tax benefits for families of children enrolling in often-costly sports programs.

As for OAS, Conservatives have not yet specified what they’ll do. But they’re properly highlighting a need for reform in the face of a demographic challenge posed by retiring baby boomers.

New Democrats and Liberals this week began leading a charge against any changes, with both parties mobilizing the public with online petitions.

Between now and 2030, OAS costs are expected to triple. While that will represent only a modest increase when set against projected growth in the country’s overall economy, any hike in costs potentially will be problematic when seniors’ health care needs are factored in.

It’s thus defensible for the government to introduce reforms to make OAS more sustainable.

But surely those reforms should not be punitive for those between 65 and 67 who genuinely need financial help.

A 2009 Conference Board of Canada report cited an Organization for Economic Development study that showed only the Netherlands, with an elderly poverty rate of two per cent, outperforms Canada when it comes to keeping seniors out of poverty.

Canada’s rate is 5.9 per cent – remarkably, down from nearly 37 per cent 40 years ago.

But the ranks of the low-income elderly began growing again in the mid-1990s.

A 2009 report by the Canadian Centre for Policy Alternatives, titled Women’s Poverty and the Recession, contends that 14 per cent of single older women are poor.

Centre researcher Monica Townson accused the Harper government of “seriously undermining progress toward reducing women’s poverty in Canada.”

Far better than raising OAS eligibility for everyone, Conservatives should restrict the benefit to those who really need the money.

Seniors increasingly will want to keep their jobs beyond age 65, especially since investment returns have been so scant in recent years and more older people are entering retirement with debt.

But not everyone will be able to keep working.

The disabled or those with physically onerous jobs should have the option of turning to OAS, which also functions as a gatekeeper for eligibility for a host of provincial and municipal social programs.

At present only two per cent of Canadians over 65, with incomes of more than $112,000 yearly, have OAS benefits entirely clawed back through the tax system.

Five per cent experience partial clawbacks, starting at about $67,000.

To make the program more sustainable, government reasonably could begin claw-backs at income levels of, say, $40,000; and cancel the entire benefit for those with incomes over $50,000.

That would be a far more rational, and politically salable, response to the legitimate financial challenge presented by a baby boom bulge that is about to retire.

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