Policy Paper on the Affordability of the Old Age Security Program

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February 2012: Monica Towson of the Canadian Centre for Policy Alternatives has written a policy paper that examines the Prime Minister’s contention that the Old Age Security Program is unsustainable.  Ms. Townson examines the facts and cites  pension experts who say the public retirement system is financially sound.   The following is an excerpt from her policy paper: “OAS – Can We Afford It?“:

 

Old Age Security is the basic building block of Canada’s retire- ment income system. It is a flat rate monthly benefit that goes to everyone at age 65, provided they meet certain residency requirements. Canadians build on that foundation, saving for their retirement with benefits from the Canada or Quebec Pension Plan, a workplace pension if they’re lucky enough to have one, and private savings.

 

But now Prime Minster Harper says OAS is unsustainable. According to the Prime Minister, the program will not be able to accommodate the retirement of the baby boom generation over the next 20 years, so something must be done. Although details were sketchy at first, Harper now admits he is planning to raise the age of eligibility for OAS from 65 to 67.

 

Pension experts don’t agree with him. In a 2010 paper on Canada’s pension system, commissioned by the Department of Finance for the federal and provincial finance ministers’ Re- search Working Group headed by Jack Mintz, Edward White- house, who leads the pensions team in the Social Policy Divi- sion of the OECD, said that “long-term projections show that the public retirement income system is financially sustainable.”

 

He concluded “There is no pressing financial or fiscal need to increase pension ages in the foreseeable future.”