A penny for your thoughts on pensions might save taxpayers money, but could also prove costly for retirees down the road.
In a speech in Switzerland last week, Prime Minister Stephen Harper tested the waters about making changes to the Old Age Security (OAS) pension — which provides a basic pension amount to almost everyone over the age of 65 who has lived in Canada for more than 10 years — to make the allowance more sustainable. Although he released no details, speculation abounds that government could consider raising the age of eligibility to 67.
Conservative MP Dan Albas (Okanagan-Coquihalla) said there was no concrete plan pitched to government on what those changes might be.
“I don’t have a proposal in front of me that I can say to my constituents what it is,” he said. “I think what the prime minister is talking about is looking at these issues objectively, to be proactive. We don’t want to be like Greece and have to be reactive.”
Albas said Canadians are facing some demographic challenges as the baby boom generation reaches retirement age. Right now there are about 4.7 million people who are paid Old Age Security benefits; but by 2030, that figure is projected to rise to 9.3 million. Put into dollar amounts, the cost of OAS could rise to $108 billion annually from the present-day $36 billion.
Those funds all come from general revenue, he added, as the OAS does not come out of a fund akin to that of the Canada Pension Plan.
“I think if you look at the very nature of the numbers, there is some sustainability issues,” he said. The task ahead, Albas explained, is figuring out how to come up with the money to continue OAS.
“We do not want to have a situation where we cannot have that program. It’s a program that people count upon and one that needs to be preserved. Part of that is to look at it from an objective viewpoint to make sure it can be funded,” he said.
The issue hits close to home for the majority of residents in the Okanagan, who are already retired or looking over the horizon toward their golden years. Albas said his constituency office has received several calls from residents ready to express their concerns about losing a portion of their income or having to adjust their immediate retirement plans.
He added that he has brought those concerns to the prime minister’s office, and heard news that might help alleviate those on fixed incomes or in their final years of employment.
“I would like to confirm that no change would occur without substantial notice and accompanying adjustment periods to make sure sufficient time is provided to adjust and plan appropriately for your retirement,” he said.
“We’re not talking about anyone who’s currently receiving OAS, or those people who are set to receive it in the next little while. We’re talking about more of a long-term look at how we can be proactive now so we’re not left in a Greece-like situation down the road.”
Albas would not define what the “next little while” would mean in terms of time, but said his constituents have “taken comfort” in hearing changes would be implemented with a medium- to long-term view.
But for NDP MP Alex Atamanenko (Southern Interior), delaying or reducing OAS benefits only serves to illustrate the government spending preferences.
“The prime minister is floating this idea. I completely disagree with what he’s doing. This is wrong,” he said. “Any kind of spending in government is based on priorities. Why would he cut pensions to seniors or raise the eligibility when at the same time he is proposing to give another round of corporate tax cuts to people who don’t need it?”
Atamanenko said even if the government doesn’t make immediate changes to OAS, people who plan for retirement in the future must readjust plans yet again, after the stock market tumble in 2008 stripped years of gains from many Canadians’ nest eggs.
“They’ve planned they’re going to get whatever they’re going to get, and they’ve factored Old Age Security in,” he said. “A lot of those folks have already lost a pile of that money because their other savings have been hit hard, and now the prime minister is hitting them again.”
Atamanenko said if the government does require additional funding to sustain OAS transfers to individuals, then now is the time for innovation, not reductions. “Surely there’s a creative way of doing that, of generating … revenue to let some interest build. If there’s a will to do that, they’ll find a way.”
Albas said that is what the government is trying to achieve. “I think it’s important to have these discussions on an objective way so we can have this feedback and make sure we come back with proposals that people find both practical and sustainable so that people can retire with dignity, but at the same token future generations know that system’s going to be preserved for them,” he said.
His Southern Interior counterpart, however, says government should be taken out of the review process to ensure the changes aren’t politically motivated.
News about potential changes to the OAS follow on the heels of talk about reviewing public service and MP pensions, which mirror concerns issued by the right-wing lobby group of the Canadian Taxpayers’ Federation.
“Our party has called for an independent review. Let’s get some kind of independent commission looking into this and putting it into context. The one thing we shouldn’t be saying is, ‘We have to get rid of pensions.’ I don’t think that’s right,” Atamanenko said.