Addressing delegates at the World Economic Forum in Davos, Switzerland, Prime Minister Stephen Harper set out his priorities for immigration, health and other topics. However, his reference to pension reform is dominating news coverage.
These changes are not targeted at the Canada Pension Plan which is already undergoing changes. The Guaranteed Income Supplement (GIS) for lower-income Canadians is also not expected to be impacted. The target, Old Age Security (OAS).
OAS is a non-contributory, plan funded out of general tax revenue. It pays a maximum of $540/ month although the average is $508/month. It is subject to certain residency requirements and is indexed to the rate of inflation. You must apply to receive it and can begin to collect it at the age of 65 for life. For higher income Canadians (those with net income above $69,562) a "clawback" is in effect.
So why now? Again, increased longevity and the baby boomers moving into retirement. OAS commitments in 2010 were $35.6 billion and expected to increase by 32% by 2015. Actuarial calculations indicate that this could grow to $108 billion by 2030.
With more Canadians retiring and less working where will the tax revenue come from to pay for the program? The present balloon being floated is to increase the age of eligibility from age 65 to 67. Details are vague but the prime minister has said that this will not impact those already in or close to retirement.
Undoubtedly, this will be controversial and filled with rhetoric that will dominate the news for the months ahead.
MP's own pensions, already under intense public scrutiny, will likely have to be addressed for the general public to stomach further changes to their own.
How will those nearing retirement feel about receiving less than those already receiving OAS? The quietest group will be those further out, the working poor, already faced with job uncertainty and disappearing employer pensions. Who will speak for them?
It would be easy not to have this debate now. Delay it for another time and another government. Heck, most of the politicians debating it won't ever be eligible to collect it. It would also be irresponsible.
The Mulroney and Chretien governments tried and backed off in the wake of public outcry. We only need to look at Europe to see what happens when today's challenges become tomorrow's crises.
