Your Post-Federal Budget OAS and GIS Update

CARP members did not accept the government’s argument that OAS makes the budget unsustainable and are less likely now to accept government rationales.  When asked how to reduce the OAS budget, most of the CARP members prefer lowering the maximum eligibility threshold over 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 government should provide stimulus for youth job growth, 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.

On a positive note – proactive enrolment for OAS and GIS benefits and voluntary deferral of OAS pension

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.

CARP has called for auto-enrolment for OAS and especially GIS since there have been over 150,000 seniors who would have been eligible for GIS but did not apply for whatever reason. Since this group is likely to require some additional outreach effort, the auto enrollment being proposed is welcome but outreach efforts should continue to cover those who are “off the grid”.

To improve flexibility and choice in the OAS program, starting on July 1, 2013, the Government will allow for the voluntary deferral of the OAS pension, for up to five years, allowing Canadians the option of deferring take-up of their OAS pension to a later time and receiving a higher, actuarially adjusted, annual pension. For example, individuals could continue to work longer and defer taking up their OAS pension beyond age 65, resulting in an actuarially adjusted pension starting in a subsequent year. This will benefit those who are still working or can make do without the OAS payments or would have had OAS clawed back in any event.

The adjusted pension will be calculated on an actuarially neutral basis – meaning that it will not cost or save the government any money – as is done with the CPP. This means that, on average, individuals will receive the same lifetime OAS pension whether they choose to take it up at the earliest age of eligibility or defer it to a later year. The annual pension will be higher if they choose to defer. GIS benefits, which provide additional support to the lowest-income seniors, will not be eligible for actuarial adjustment.

To read the full Federal Budget, click here

To read CARP’s backgrounder on OAS sustainability, click here