As confirmed last week, the federal budget has restored the age of eligibility for old-age security to 65, a move some in the industry are questioning.
The government proposed to cancel the provisions in the Old Age Security Act that increase the age of eligibility for old-age security and guaranteed income supplement benefits from 65 to 67 and allowance benefits from 60 to 62 over the 2023-29 period.
Prime Minister Justin Trudeau had said in an interview on March 17 that the decision by the previous government to increase it to 67 wasn’t the right approach and there needs to be more thought given to the system of supporting Canada’s seniors.
“In many ways, you could question whether it was necessary,” said Jean-Philippe Provost, leader of Mercer’s retirement practice in Canada. “If you look at some of the key indicators, the poverty among seniors is at an all-time low. The other thing is that people are living longer than they did in the past, so maybe increasing it to 67 made sense.
“If you look at other industrialized countries, pretty much every single one of them has announced they will increase it to 67 — or even 68 or 69. The increase from 65 to 67 was really only starting to kick in from 2023, so we still had quite a bit of time. On the other hand, there’s still 60 per cent of workers in Canada who are not covered by a registered pension plan. On the basis of that, it means OAS is one of the main sources of income they will have when they reach retirement age.”
In a column written for Benefits Canada this week, Morneau Shepell’s chief actuary, Fred Vettese, expressed a similar view. “The case for OAS at 65 used to be straightforward because it was purely and simply protection from poverty in old age. OAS has morphed away from that because age 65 isn’t even considered old anymore,” he wrote.
“OAS now also serves as a buffer against unemployment and premature disability. To the extent that has become its new rationale, a more targeted program than OAS could no doubt more efficiently serve the needs of the older unemployed and those with disabilities. If the government created such a program, we shouldn’t object to OAS starting at age 67 or even 70.”
Read: Why OAS needs a makeover
The budget also proposed to increase the guaranteed income supplement top-up benefit by up to $947 annually for the most vulnerable single seniors starting in July 2016, a measure aimed at supporting those seniors who rely almost exclusively on OAS and GIS benefits and may therefore be at risk of experiencing financial difficulties.
“This enhancement more than doubles the current maximum Guaranteed Income Supplement top-up benefit and represents a 10% increase in the total maximum Guaranteed Income Supplement benefits available to the lowest-income single seniors,” said the budget document.
“This measure represents an investment of over $670 million per year and will improve the financial security of about 900,000 single seniors across Canada.”
Single seniors with annual income (other than OAS and GIS benefits) of about $4,600 or less will receive the full increase of $947, according to the budget. Above this income threshold, the amount of the increased benefit will gradually decline and will be completely phased out at an income level of about $8,400. Benefits will be adjusted quarterly with increases in the cost of living.
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