CARP disappointed that the federal government ignored call to leave OAS alone

Article posted March 31st, 2012

On March 29, 2012 following the Federal Budget CARP released this statement:

OAS changes will hurt, not help next generation; vague promises to confer with provinces to protect some low income people not enough: CARP

Toronto, ON: CARP members will be disappointed that the federal government ignored their call to leave OAS alone or at least make provision for those who will depend on OAS. Even those resigned to changing OAS spending would rather see changes to the threshold than changing the age of eligibility. According to CARP Polls in the past two months, CARP members roundly reject raising the OAS eligibility age and see better ways to help younger Canadians– such as increasing job opportunities.

As was widely anticipated, the federal government announced changes to the eligibility rules for Old Age Security benefits by raising the age from 65 to 67. But notwithstanding the widespread concerns, there will not be specific measures that will protect low income pre-retirees – just some provision for groups already on government assistance. Without special provision for them, other people in need of income support who cannot wait the extra two years for their OAS and GIS would have to turn to provincial income support programs. Although the Government will compensate provinces and territories for net additional costs they face resulting from the increase in the age of eligibility for OAS benefits, these individuals would presumably have to applied for social assistance programs which both carry stigma and are unlikely to match the OAS pension amounts.

The Budget states that the government proposes to:

Gradually increase the age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement benefits from 65 to 67. This change will start in April 2023, with full implementation by January 2029, and will not affect anyone who is 54 years of age or older as of March 31, 2012.

This proposed legislative change to the age of OAS/GIS eligibility will not affect anyone who is 54 years of age or older as of March 31, 2012. Thus, individuals who were born on March 31, 1958 or earlier will not be affected. Those who were born on or after February 1, 1962 will have an age of eligibility of 67. Those who were born between April 1, 1958 and January 31, 1962 will have an age of eligibility between 65 and 67. For example, someone born in April 1960 will be eligible for OAS/GIS at age 66 and one month.

There is acknowledgement of the problem of those who would not be able to wait the two extra years with the special provisions for certain groups but not anyone else.

The Government will ensure that certain federal programs, including programs provided by Veterans Affairs Canada and Aboriginal Affairs and Northern Development Canada that currently provide income support benefits until age 65, are aligned with changes to the OAS program. Without such an alignment, individuals receiving benefits from these programs would stop receiving them at age 65 and face an income gap until age 67 when they become eligible for OAS and GIS. The alignment will ensure that these individuals do not face a gap in income at ages 65 and 66.

The Government will discuss the impact of the changes to the OAS program on Canada Pension Plan (CPP) disability and survivor benefits with provinces and territories, who are joint stewards of the CPP, in the course of the next triennial review. The Government will compensate provinces and territories for net additional costs they face resulting from the increase in the age of eligibility for OAS benefits.

“The prospect of waiting two additional years before receiving OAS has alarmed especially low income earners who do not readily see how they can change their circumstances no matter how long it takes to phase in the changes.

At the very least, eligibility for GIS and provincial benefits should have been de-coupled from OAS eligibility or provision should have been made to replace the additional income support for those most in need, especially single seniors. Extending support for the very vulnerable – those already on government support programs – is welcome but should be extended to all those in need.

Nonetheless, CARP members would rather the government look elsewhere for budgetary savings”, said Susan Eng, VP Advocacy, CARP.

The Budget also proposes to improve flexibility and choice by allowing Canadians the option of deferring take-up of their OAS benefits to a later time and receiving higher annual benefits. The adjusted pension will be calculated on an actuarially neutral basis, as is done with the CPP.

This would not result in any budgetary savings and would benefit only those who can do without the income support.

In recent CARP Polls™ the vast majority of CARP members said

  • They objected to the anticipated rise of the eligibility age, and said it would affect their vote
  • They preferred the Parliamentary Budget Officer’s assessment of the sustainability of continuing the OAS spending as it is to that of the government, and
  • They strongly believe that there were better ways to secure the future for the younger generation – such as by creating job opportunities for them rather than cutting OAS.

“For the most part, CARP members knew that their own OAS will not be affected and do not see how cutting OAS spending would help future generations. Instead, they are calling for measures that will create job opportunities for them as a better way to secure their future. Rather than selfishly guarding their own interests, as has been suggested, CARP members and other older Canadians are defending an important part of the social safety net and do not want to see it torn up for their children and grandchildren”, added Eng.

CARP polls its members in its twice monthly e-newsletter. Over 4,000 responded to the poll immediately following the speech in Davos at which the OAS changes were first suggested. In the latest poll, issued Friday March 23, 2012, CARP members continue to demonstrate their opposition to raising the OAS eligibility age. However, those who consider the change to be inevitable wanted a softening of the impact through a provision for single seniors or decoupling OAS and GIS. This did not occur except for the limited category of people already on government assistance.

While CARP members do not accept the government’s argument that OAS makes the budget unsustainable, preferring the opposite assessment of the Parliamentary Budget officer by six fold, when asked how to reduce the OAS budget, most of the CARP members prefer lowering the maximum eligibility threshold over lowering the clawback threshold or raising the eligibility age.

To counter arguments that the OAS changes are necessary to help future generations, two thirds of CARP members think that the budget should include stimulus to provide job growth for youth, and even more support more apprenticeships for youth or keeping high value jobs in Canada as a solution to youth unemployment. There is wide agreement these measures will do more to secure the future for youth than altering OAS.

One positive note is the Proactive Enrolment for OAS and GIS Benefits

The Budget proposes to put in place a proactive enrolment regime for OAS and GIS.

As part of the Administrative Services Review, initiated in Budget 2010, the Government is pursuing additional standardization and consolidation opportunities to improve the way it delivers services to Canadians while generating operational savings. In the context of this initiative, the Government will improve services for seniors by putting in place a proactive enrolment regime that will eliminate the need for many seniors to apply for OAS and GIS. This measure will reduce the burden on seniors of completing application processes and will reduce the Government’s administrative costs. Proactive enrolment will be implemented in a phased-in approach from 2013 to 2015.

Members are most likely to support taxing the wealthy or reducing the civil service as budget-cutting measures, and are far more likely to suggest these than changing OAS. Both mothballing our submarine fleet and reducing our order of fighter jets are seen as more acceptable cost-cutting measures than raising the age of eligibility for OAS from 65 to 67

The vast majority of members think that military budgets must be subject to the same scrutiny as domestic budgets, and that Canadians can support the military and responsible military budgeting at the same time.

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