Ken Battle, president of the Caledon Institute of Social Policy, says the issue could become a political headache for the Tories.
“Any time you try to screw around with old age security it can be dangerous, no matter what you say.”
The government says the cost of the OAS, without reforms, will soar to $108 billion in 2030 from $36.5 billion in 2010. But critics and experts say that, in fact, when viewed as a ratio of Canada’s GDP, the increase in pension costs won’t be so stark.
“The key is that the pension system is sustainable,” says NDP critic Wayne Marston. “There is not a crisis.”
Battle also says the cutbacks are not necessary — and he urges the government, if it is determined to proceed, to offset the changes by measures to ensure poor seniors, aged 65 and 66, still receive benefits.
As well, he suggests a new “variable” eligibility formula that would allow people to collect their OAS benefits at different times — say as early as 60 and as late as 70. Those who collect their benefits earlier would receive a smaller payment; those who put it off until later in life would be rewarded with a higher benefit.
Battle says if the government merely extends the OAS eligibility to 67, the result will be a “regressive” shift that hurts poor seniors the most. He says seniors aged 65 and 66 will end up on provincial welfare rolls or would try to survive on low-wage jobs.
“Paying welfare to near seniors is hardly an admirable social security system. It really is unfair.”
Battle makes a good points on the regressive nature of these measures. Poor seniors struggling to get by should receive OAS. But some of these reforms are necessary. I’ve already written that when it comes to pensions, Canadians are whiners. We need to accept that we’re living longer and by consequence we’re going to have to work longer.
As far as Ottawa MPs, their snouts have been in the pension trough for far too long. On top of getting generous benefits, their pension plan dips directly into public coffers every quarter, effectively shielding it from market dislocations. Sweet deal, makes you wonder why all Canadians don’t have such gold plated pensions.
The most contentious cuts will be on public sector pensions. Here is where the government has it all wrong. The market yields the C.D. Howe Institute uses to calculate their liabilities are too low. By contrast, the rosy investment projections U.S. pension funds use to calculate their liabilities are too high. I think we got it right in Canada and do not need to scare monger people into believing our unfunded pension liabilities are much higher than they truly are.
What reforms do we need in the public sector? We need to raise the age of retirement and just make sure the contribution rates are high enough to fund these plans. We also need to implement reforms on governance and make all public pension plans a lot more transparent and accountable. I’m a stickler on that issue because I’ve seen and know too much. Every large pension fund in Canada has skeletons it wants to bury. Every single one of them.
But the most pressing reforms won’t be in the budget. These include expanding the CPP and providing better universal coverage by bolstering defined-benefit plans for every Canadian, not just MPs and public sector workers. While Quebec is pressing forward with its version of PRPPs, the truth is Harper’s Conservatives should stop banking on PRPPs, roll up their sleeves and do what’s right for the country. And if the banks and insurance companies had any sense of vision, they would be pushing them to do exactly just that.
Pensions are going to be widely contested in the next election and with good reason. As more and more Canadians retire, they’re legitimately worried about living their golden years in peace and security. Instead of addressing their concerns, provincial and federal governments have largely ignored them and come up with half-baked measures that will only accelerate pension poverty.