We also propose a 15% increase to the Guaranteed Income Supplement of the Old Age Security pension to lift all seniors out of poverty immediately.

This proposal is endorsed by Monica Townson, one of Canada’s leading pension experts. Townson supports an extension of OAS/GIS benefits to ensure a stronger foundation in Canada’s pension system.

Moving forward, since an improved CPP will provide better pension benefits, tax subsidies to RRSPs could be reduced to help finance this increase in Old Age Security benefits paid to all workers. The tiny personal tax cuts introduced in the 2008 Federal Budget should also be repealed to help finance a larger GIS. This would be a positive for the Canadian economy itself, given studies show low-income seniors are more likely to spend extra money on essential needs.

As the table below demonstrates, average monthly benefits offer bare subsistence levels of income:

(Source: Service Canada: Old Age Security Benefit Payment Rates, October - December 2010)

Why This Plan Makes Sense

Public pensions are a success story

In 1980, poverty rates among seniors were double those of the working-age population. By 2004, poverty rates among seniors were half those of the working-age population. Federal public pensions like OAS and GIS were crucial to this success.  OAS and GIS benefits were linked to price inflation in the early 1970s,
so they have continually grown in value.

OAS and GIS comprise a practically universal, basic pension plan for 95% of Canadian seniors. Today over 4.5 million Canadian seniors collect OAS, and 1.6 million collect the GIS.   OAS and GIS are a cherished part of federal public policy, on par with medicare in popularity. They have remained in place for decades despite attempts to limit them in the 1980s (by the Mulroney Tories) and 1990s (by the Chrétien Liberals).

Public pensions are too modest

Despite their popularity, the low benefits afforded by OAS/GIS remain a major problem, particularly for vulnerable seniors (single women, First Nations, seniors with disabilities).

Seniors deserve better

It is unfair to ask those who built this country to live meagre lives in retirement. While the “private savings” pillar of Canada’s pension system has faltered, OAS/GIS offers a strong foundation. We must build on this foundation to afford respect and dignity to all Canadian seniors. OAS/GIS may provide a bare subsistence income, but seniors deserve better.

How Our Plan Would Work:

We propose an increase to GIS benefits to increase the bare minimum pension for low-income seniors.

The costs are modest: Because of the good work already accomplished through OAS/GIS, closing the poverty gap for seniors is not expensive. It is possible to do so immediately through a modest 15% increase to GIS benefits, which would cost $1.1 billion. This is a small fraction of what’s currently spent on tax subsidies for RRSPs. Tax subsidies for RRSPs ($18 billion) now exceed half of what’s spent on federal public pensions (OAS/GIS).

This increase could be financed by repealing the puny personal income tax cuts announced in the 2009 Federal Budget. They could also be financed by reducing the yearly limits for RRSPs.

Our plan would put more every month into the hands of low-income seniors, who would then spend this money on basic needs.

Boosting the incomes of poor seniors would provide real economic stimulus to Canada’s economy. It offers a boost to the domestic and local economy at a crucial time. 

Why This is a Good Idea:

Seniors would have more pension security As Monica Townson explains, increasing OAS/GIS offers more pension security to seniors, and offers a stronger foundation for Canada’s pension system.

This is a pan-Canadian solution to a pan-Canadian problem:Some provinces have suggested their own solutions to address seniors’ issues, but these initiatives won’t suffice. The OAS/GIS framework can’t be matched by any provincial or regional solution.

Can we afford to do this?

Yes. As with our CPP proposals, we can’t afford not to do this. If we don’t increase GIS, the cost of widespread poverty in retirement will be far worse. Once again, we either pay modestly now or pay far more later. Research suggests it is cheaper and more progressive to pay now.

Won’t the amount spent on GIS increase as the “baby boomer generation” retires?

Yes. But this doesn’t mean we shouldn’t improve OAS/GIS, the foundation of Canada’s pension system. The federal government’s own research indicates OAS expenditures will rise to 3.1% of Canada’s Gross Domestic Product by 2030, the year experts predict one in four Canadians will be over age 65.

Our proposal will increase OAS/GIS expenditures modestly, to barely 3.6% of Canada’s GDP. Also, our proposal to improve the CPP means fewer seniors by 2040-2050 will require GIS.

We think this is a reasonable investment to ensure seniors have dignity and respect in retirement. Like our CPP proposal, the results are far worse if we do nothing. We either invest in federal public pensions, a proven tool to reduce senior poverty, or we allow more seniors to suffer.