Pension reform raises questions about effect in provinces

First published by the Globe and Mail on February 2nd 2012.  To see this story and other related stories on the website, please click here

Free bus passes for poor seniors in British Columbia never came up during Stephen Harper’s speech to the World Economic Forum in Davos, Switzerland. Neither did prescription drug cards for struggling retirees in Newfoundland. But there is a link.

The Prime Minister has signalled that he is ready to tackle long-term questions about the sustainability of Canada’s social programs as the ratio of seniors to workers climbs.

Yet as provinces, seniors groups and federal opposition parties read the tea leaves coming from Ottawa on pension reform, questions are being raised about the trickle-down effects of a unilateral change in Ottawa.

Several provinces require citizens to prove they receive the federal Guaranteed Income Supplement for low-income seniors to qualify for their own programs aimed at helping poor seniors. In addition to B.C. and Newfoundland, other examples include Manitoba, Nova Scotia and Ontario. Liberal MP Gerry Byrne pointed out that the city of Corner Brook uses the GIS as a trigger for tax breaks on water bills for low-income seniors.

Using the GIS is a way for provinces and municipalities to receive proof that those applying for programs to help poor seniors are, in fact, poor.

If Ottawa raises the current eligibility age of 65 for Old Age Security and the GIS – a prospect the government has neither ruled out nor confirmed – it would impact these other programs. Presumably provinces could find other ways to continue offering these programs, but critics argue a federal change would clearly create headaches – and possibly much higher costs – for other governments.

The GIS is a top-up program tied to Old Age Security. Monthly payments can range from a few dollars to as high as $732.36, depending on income. The GIS can only be claimed by seniors with incomes under $16,368.

“The interaction with provincial programs will exacerbate the impact on low-income seniors,” said Susan Eng, a spokesperson for the seniors advocacy group CARP.

The organization recently polled its members on the Prime Minister’s Davos speech, in which he said the growing cost of Canada’s retirement income support programs must be made sustainable so that they do not threaten social programs.

Some experts question whether the OAS really has an affordability problem. And even though Mr. Harper insists current seniors will not be affected by any changes, CARP members are giving the speech a thumbs-down.

The online survey of 3,540 CARP members found 63 per cent were opposed to increasing the age of eligibility from 65 to 67. Further, support for the Conservatives among CARP members dropped from 44 per cent before the speech to 35 per cent after.

Mr. Harper hasn’t yet said what changes he has in mind for the OAS benefit, but Conservative officials are not contradicting rampant speculation that the qualifying age of 65 will increase for future retirees.

On Wednesday, Mr. Harper indicated that any changes would be phased in.

“This government has made it very clear that we will protect all of the benefits that go to seniors today,” he said. “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.”

Alyson Queen, a spokesperson for Human Resources Minister Diane Finley, declined to comment on the potential impact of changes on the provinces.

“We will take balanced, responsible, and prudent action to ensure OAS remains sustainable for future generations of Canadians,” she said in an e-mail. “At this time we cannot speculate on any specific changes as we have not yet announced a policy.”

Quebec’s minister responsible for employment and social security, Julie Boulet, said the Harper government’s plans to reform OAS could cost the province “several tens of millions of dollars.” She said the provinces need to be consulted before Ottawa moves ahead with pension reform.

Interim Liberal leader Bob Rae called the potential impact on the provinces a “cascade of injustice” Wednesday as he questioned the Prime Minister in the House of Commons.

“He is not only dumping on the most vulnerable senior citizens, including women who are going to be qualifying for old age security who get their old age pensions, he is also dumping on the provinces, dumping on municipalities, creating a cascade of injustice because of a totally manufactured crisis on his side,” Mr. Rae said.

© The Globe and Mail