During the federal election in May 2011, the Conservative Party promoted its improvements to retiree benefits, emphasizing that "Canadian seniors have earned our gratitude for a lifetime of hard work in service to our families, our communities and our country. They deserve to be able to enjoy their later years in dignity."
The Conservatives gave no indication during the election that they were about to make it more difficult to qualify for Old Age Security (OAS). Less than ten months into their majority government, the Conservatives dropped a bombshell and announced they were going to tighten eligibility to this important pillar of Canada's retirement income system that millions of Canadians depend upon and will depend upon in years to come.
The Canadian Labour Congress has called on the Government of Canada to convene a national summit on retirement income security so that all Canadians have the opportunity to make their opinions known and their voices heard.
As part of the CLC's Retirement Security for Everyone campaign, 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 GIS benefits paid to all workers. While virtually every Canadian 65 or older can collect OAS, the wealthiest Canadians benefit most from taxpayer subsidies of RRSPs. The top 11% of income earners contribute more to RRSPs than the remaining 89% combined. An increase in the GIS 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.
In the June 2011 budget, the federal government introduced a modest GIS top-up of $50 a month for single seniors and $70 a month for couples with extremely low incomes. Unfortunately, such a modest top-up does very little for the vast majority of GIS recipients, many of whom live in poverty or financial insecurity.
As the table below demonstrates, average monthly benefits offer bare subsistence levels of income:
|Recipient(s)||OAS per month||GIS per month||Total OAS/GIS average benefits|
|Single Person||$540.12||$732.36||$1,272.48 per month
$15,269.76 per year
|Each Spouse||$540.12||$485.61||$1,025.73 per month
$12,308.76 per year
(Source: Service Canada: Old Age Security Benefit Payment Rates, Jan-Mar 2012)
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 5 million Canadian seniors collect OAS, and 1.8 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, and recent immigrants).
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 9.9 billion currently spent annually on tax subsidies for RRSPs.
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 3.16% 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 3.26% 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.