# The Future of universal old-age/retirement benefits (OAS & CPP)



## a_majoor (3 Feb 2012)

Someone in the FP coments notd that by allowing the opposition to make apocalyptic predictions, the eventual reforms will look so mild that the NDP and Liberals will have spent tons of political capital on nothing:

http://fullcomment.nationalpost.com/2012/02/01/john-ivison-note-to-bob-rae-yes-we-have-a-pension-problem/



> *John Ivison: Note to Bob Rae: Yes, we have a pension problem*
> John Ivison  Feb 1, 2012 – 8:24 PM ET | Last Updated: Feb 2, 2012 7:52 AM ET
> 
> “There is absolutely no justification for doing what [Stephen Harper] is doing,” says interim Liberal leader Bob Rae.
> ...


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## dapaterson (3 Feb 2012)

Simple, two pronged solution for OAS:

(1)  Decrease the clawback threshold over time - for example,  only use half the CPI for increases to indexing for the next twelve years.  

(2)  Over the next 12 years, increase the eligibility threshold by one year every three, taking it to age 69 for eligibility in 2024.

Para (1) "soaks the rich" and is thus unassailable by the NDP and Liberals; para (2) acknowledges longer lifespans and greater working life, but gives considerable time to adjust.


Besides, if that extra $500 and change per month is such a huge amount, its loss can be offset by a formerly retired individual working 50 hours a month at minimum wage - that's roughly 1 1/2 days per week selling coffee at Starbucks...


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## a_majoor (4 Feb 2012)

A short history of how CPP reform was accomplished the last time. IF the OAS was reformed at the same time (the 1990's), simple compound interest would have ensured the problem was more managable today:

http://opinion.financialpost.com/2012/02/03/william-watson-no-no-the-status-quo/



> *William Watson: No! No! The status quo!*
> William Watson  Feb 3, 2012 – 6:43 PM ET
> 
> Paul Martin had no trouble with top-down pension reform
> ...


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## McG (8 Feb 2012)

> *Old Age Security sustainable, says budget watchdog*
> Meagan Fitzpatrick,
> CBC News
> 08 Feb 2012
> ...


Read more at:  http://www.cbc.ca/news/politics/story/2012/02/08/pol-old-age-security.html?cmp=rss


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## GAP (8 Feb 2012)

I'm sure I could change a bunch of numbers to make any argument I want....not sustainable, sustainable, April - maybe sustainable, May - unknown  :


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## Rifleman62 (8 Feb 2012)

Anything the current government says:  i.e. the sky is blue.

Parliamentary Budget Officer Kevin Page: Absolute nonsense.

CBC screams: Hidden agenda of Harper to quickly, and as painfully as possible, starve all of Canada's seniors (including Quebec!)


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## Edward Campbell (8 Feb 2012)

Rifleman62 said:
			
		

> Anything the current government says:  i.e. the sky is blue.
> 
> Parliamentary Budget Officer Kevin Page: Absolute nonsense.
> 
> CBC screams: Hidden agenda of Harper to quickly, and as painfully as possible, starve all of Canada's seniors (including Quebec!)




Given the PBO's track record, which is pretty consistently worse than the government's own forecasts, I'll take the "hidden agenda," thanks.


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## DBA (9 Feb 2012)

The PBO comes across as useless. It warns about structural deficits that must be tackled but then when action is actually contemplated says it isn't necessary. Which is it? Controlling the growth of some programs sure seems like a very prudent way to tackle structural deficits.


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## GAP (10 Feb 2012)

Kinda makes sense...........

Rethink retirement
Jack M. Mintz  Feb 8, 2012
Article Link

Gradual changes to Old Age Security would make room to spend on health care and other funding priorities

The recent kerfuffle over Old Age Security costs have raised the angst that seniors’ benefits of up to $540 per month may be cut. Older Canadians should take a deep breath. Any changes to OAS will not affect current or soon-to-be retirees. In fact, federal budgets won’t be affected for years to come.

Canada’s pension is financially sustainable, a conclusion reached by the research I directed in 2009 for federal-provincial-territorial ministers of finance. But bigger issues are at play, as pointed out by the Prime Minister in his National Post interview last Saturday. The whole package of elderly support measures will be a significant drain on public finances in the future. We should examine the state’s role in supporting retirees who are now living much longer.

In the past, federal governments enhanced elderly benefits without taking sufficient care to examine the economic effects especially on labour markets. When OAS was introduced in 1952, retirement eligibility was 70 years of age while the average life expectancy was 68. Many would have passed away before receiving OAS.

During the years 1965-69, the eligibility age was moved down to 65, even though life expectancy was increasing. Now, with life expectancy above 80, most Canadians qualify for OAS for a very long time after 65. Other OAS changes included indexation of benefits (1973), spousal allowance (1975) and the end of universality for high-income seniors (1989). The OAS is clawed back at the rate of 15¢ for every dollar when individual income is above a threshold (for 2012, $69,562). It is fully clawed back when income reaches $112,772.

Given Canadian demographic changes, we know two things. First, labour shortages, already a complaint in many parts of Canada, will be exacerbated as post Second World-War Boomers retire. Second, low fertility rates, offset only in part by robust immigration policies, don’t compensate for the retirees. Thus, the relatively shrinking working population will pay most of the taxes needed to support an increasing number of retirees.

From an economic point of view, how long should the state subsidize retirement? The OAS along with other elderly benefits makes it easier to retire with good replacement income at the age of 65. Yet, many seniors wish to and can easily work longer years in productive jobs. We should be considering incentives to work longer, not less, as with earlier reforms.

Demographic changes also raise fiscal concerns. Federal and provincial governments provide health, drug and long-term care benefits, elderly tax credits, OAS and the Guaranteed Income Supplement, all of which are supported by general tax revenues.
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The financial sustainability of supporting the elderly is at risk. Even though OAS spending is only 2.3% of GDP today (rising to over 3% by 2030 and then declining as Boomers die off), public health-care spending is over 8% of GDP. Canadian governments see a large share of their budgets being spent on supporting retirees, especially those with low incomes.

To help cover future expenditures, governments should reduce general support for long periods of retirement instead of cutting back health, education, infrastructure and other public services that are more critical to economic growth and Canada’s social safety net. Even though OAS itself is not a major cost to the government over time, it makes sense to save in this area to make room for other priorities. The question is what reforms should be considered. The objective for governments in providing support for the elderly is twofold.

One is to make sure low-income Canadians have a sufficient level of income for their retirement to avoid poverty. As the OECD has noted, Canada has made remarkable progress in this area in that we have one of the lowest elderly poverty rates in the world. While this has been true in recent years, we also want to maintain this distinction and even improve upon it. The second is ensuring an efficient pension system that minimizes distortions on labour supply while enabling Canadians to ensure sufficient income during the retirement years.

Given these two objectives, I recommend that we provide higher OAS payments to those Canadians who choose to work past the age of 65. Starting in 2022, the retirement age should increase at the rate of two months per year until, 12 years later, it reaches 67.

Further, the clawback for the OAS should be set at lower thresholds to focus OAS on those with low and modest incomes. One simple way is to eliminate inflation adjustments for the threshold — over time, more and more higher-income Canadians will not receive OAS benefits. Some reduction in the threshold could also be considered to help make room for other elderly support programs, such as long-term care.

All of these changes would only be introduced gradually. It is not fair to change the rules of the game on the existing elderly population who do not have the opportunities to make up for any losses in benefits. However, for the younger population, the eventual reduction in elderly benefits through OAS will reduce fiscal pressures faced by future federal and provincial governments.

OAS reform makes sense. The Harper government should continue the dialogue promoted by a published green paper on the subject.

— Jack M. Mintz is the Palmer Chair in Public Policy at the School of Public Policy, University of Calgary.
More on link


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## Edward Campbell (10 Feb 2012)

More support for reforming the OAS, from a very credible source, accoring to this article which is reproduced under the Fair Dealing provisions of the Copyright from the _Globe and Mail_:

http://www.theglobeandmail.com/news/politics/on-pension-reform-dodge-hopes-harper-steps-up/article2325915/


> On pension reform, Dodge hopes Harper steps up
> 
> JEREMY TOROBIN
> 
> ...




David Dodge is right: there are plenty of Liberals and _Dippers_ who know "full well that there's a big problem here," but their political leaders are too dishonest and too focused on immediate political davantage to allow their members to serve the country and the people; it's _"party, party über alles"_ for Bob Rae and Nycole Turmel.


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## Brad Sallows (11 Feb 2012)

The people who are old and alive today in the earliest years of retirement have had a good run.  They've seen the best of the welfare state, and shied away from paying the bill.  Having voted prosperity for themselves at the expense of others who were literally not physically present to object, they are now behaving disgracefully.  It is time for them to acknowledge their selfishness, sit down, and STFU.


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## Jed (11 Feb 2012)

Way to blunt, Brad. It ain't gonna happen.


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## Edward Campbell (15 Feb 2012)

E.R. Campbell said:
			
		

> Given the PBO's track record, which is pretty consistently worse than the government's own forecasts, I'll take the "hidden agenda," thanks.




More on Kevin Page's forecasts in this column which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/rosy-oas-forecast-rests-on-shaky-ground/article2338217/


> Rosy OAS forecast rests on shaky ground
> 
> NEIL REYNOLDS
> 
> ...




The numbers: http://www.theglobeandmail.com/report-on-business/economy/economy-lab/data-room/oas-and-gis-beneficiaries-1966-2060/article2329256/?from=2338217

It certainly looks like Kevin Page sees his role as critic or _counterweight_ to the government. If that's the case then it's a very good thing his term is not being renewed.


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## Rifleman62 (15 Feb 2012)

To pile on:

http://paulsrants-paulsstuff.blogspot.com/2012/02/about-that-pbo-expalnation-re-oas-being.html

A CAW Worker's Voice Of Reason

This blog is posted from a now retired 33 year CAW member. The purpose of this blog is to allow others to see the perspective of the average worker, rather than the views of CAW leader Ken Lewenza.
If you have any concerns or comments on this blog, contact me at paulsblues45@hotmail.com



> _Tuesday, February 14, 2012
> 
> *About That PBO Expalnation Re: OAS Being Sustainable...*
> 
> ...


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## Nemo888 (15 Feb 2012)

Brad Sallows said:
			
		

> The people who are old and alive today in the earliest years of retirement have had a good run.  They've seen the best of the welfare state, and shied away from paying the bill.  Having voted prosperity for themselves at the expense of others who were literally not physically present to object, they are now behaving disgracefully.  It is time for them to acknowledge their selfishness, sit down, and STFU.



There are lies, damn lies and statistics. The main impetus behind this is the argument that people live so much longer. But if you factor out infant mortality, childhood diseases, etc they paint a very different story.

Between 1940 and 1990 average life span for men who reach the age of 65 had increased a whopping 2.9 years.  Big fricking deal. This will destroy our economy? Increase CPP deductions and STFU you greedy *** boomers.


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## ModlrMike (15 Feb 2012)

There is serious need for both CPP and OAS reform. CPP contributions need to rise, and OAS clawback provisions need to be reviewed. Currently, OAS clawback begins when your net income is $67,668. That's NET income. Factor at least 25% nominal tax rate and you get close to 85K of gross income. That's pretty good if you ask me, and we're going to add an almost $7000 in OAS payments. The total OAS is not clawed back until you reach almost 107K in NET income. 

I know we have to ensure that our elderly folks have sufficient income, but 67K in NET is well more than many working folks make gross. Perhaps we could leave the age eligibility issue alone and increase the clawback ratio so that wealthy seniors are not getting a benefit that should more properly be aimed at poor seniors.


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## GAP (15 Feb 2012)

Nemo888 said:
			
		

> There are lies, damn lies and statistics. The main impetus behind this is the argument that people live so much longer. But if you factor out infant mortality, childhood diseases, etc they paint a very different story.
> 
> Between 1940 and 1990 average life span for men who reach the age of 65 had increased a whopping 2.9 years.  Big fricking deal. This will destroy our economy? Increase CPP deductions and STFU you greedy *** boomers.



tsk tsk.....


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## Edward Campbell (15 Feb 2012)

ModlrMike said:
			
		

> There is serious need for both CPP and OAS reform. CPP contributions need to rise, and OAS clawback provisions need to be reviewed. Currently, OAS clawback begins when your net income is $67,668. That's NET income. Factor at least 25% nominal tax rate and you get close to 85K of gross income. That's pretty good if you ask me, and we're going to add an almost $7000 in OAS payments. The total OAS is not clawed back until you reach almost 107K in NET income.
> 
> I know we have to ensure that our elderly folks have sufficient income, but 67K in NET is well more than many working folks make gross. Perhaps we could leave the age eligibility issue alone and increase the clawback ratio so that wealthy seniors are not getting a benefit that should more properly be aimed at poor seniors.




 :goodpost:


I'm one of those seniors who get's "too much." I'm not complaining, mind you, but I agree the system needs reform and I will not whine if I am told to do with a bit less.

I don't pretend to know "how much is enough" but if we are going to ask current workers (in their 40s) to wait two more years to draw CPP and/or OAS then maybe pensioners can start seeing clawbacks equal to about 4% by gradually lowering that tax "clawback" threshold to, say, $65,250.


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## GAP (15 Feb 2012)

E.R. Campbell said:
			
		

> :goodpost:
> 
> 
> I'm one of those seniors who get's "too much." I'm not complaining, mind you, but I agree the system needs reform and I will not whine if I am told to do with a bit less.
> ...



and as the age increases, the clawback does also. The clawback, in my mind, should begin around the $50,000 mark (remember this is net income).


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