This article was originally published by the Toronto Star on February 22nd, 2012. To view this article and other ones like it on the Toronto Star website, please click here.
Diane Finley, the federal minister in charge of pensions, says the government is cutting back Old Age Security to protect the young.
How wrong she is.
In fact, whittling away the cornerstone of Canada’s retirement system will hurt precisely those young people the Conservative government says it is trying to help.
That’s in part because, in a world where company pension plans are near extinct and well-paid, full-time jobs are at a premium, the young won’t have much else to live on when they eventually do retire.
But it’s also because Ottawa’s still vague reform plans will almost certainly not affect the bulk of those baby boomers that Ottawa claims are at the root of the pension problem.
Human Resources Minister Finley made her pitch this week at a speech in Toronto. She even used students from a local high school as props.
Her point was that baby boomers on the cusp of retirement are in danger of bankrupting the treasury and that unless stern action is taken, the burden of financing these entitlements will fall on those now in their first bloom of youth.
It was a classic attempt to exploit the simmering intergenerational resentment directed at those in the bulging age cohort who happened to have been born between 1946 and 1964.
Typically, it was made by someone who is herself a baby boomer (Finley was born in 1957).
There is a moral argument to be made against scapegoating people simply because they happened to be born at a certain time in history. But I won’t bother with it.
The more practical argument is that, if the government keeps its word, most boomers will be spared the proposed cuts.
That’s because Prime Minister Stephen Harper has promised his reforms won’t affect those who have already hit or are approaching their 65th birthday.
If, as governments usually do when retirement planning is at stake, Ottawa provides an eight- to 10-year grace period, the proposed pension cuts won’t hit the majority of baby boomers.
The Canadians who will be hurt are those unlucky enough to have been born after the mid-1950s — which is to say those currently middle-aged and younger.
Were Old Age Security a frill, this might not matter. But it is not. It provides a basic stipend of about $500 a month to people 65 and over — with all or some being taxed back from those who earn more than a net income of $69,562.
Along with an add-on Guaranteed Income Supplement for the very poor, OAS is credited with vastly reducing the poverty rate among seniors.
Retirees who have been in the paid work force for a long time can top up their OAS with payments from the Canada Pension Plan. However, CPP doesn’t provide enough to live on for most. And some, such as homemakers, don’t qualify for this pension at all.
An even more fortunate minority has recourse to employer-sponsored pension plans. But these are swiftly disappearing.
And private schemes such as registered retirement savings plans don’t fill the gap.
So what will happen if the government goes ahead and squeezes OAS? Writing in CARP magazine, social policy analyst John Stapleton estimates that just shifting the OAS entitlement age from 65 to 67 will immediately whack at least 50,000 poor, old people.
But over time, the real victims will be those young and middle-aged Canadians who have little else in the way of pensions.
In her speech Tuesday, Finley urged young people to save more for their retirement. That’s easy for her to say. The Canadian Taxpayers Federation estimates that if Finley wins just one more election, she’ll receive an annual parliamentary pension of $92,057 — all courtesy of the public.