The coming retirement of the baby-boomer generation will have a hefty impact on Canada’s old-age security program, according to the latest actuarial report by the Office of the Superintendent of Financial Institutions.
The number of OAS beneficiaries is expected to increase by 61 per cent by 2030, from 5.8 million people in 2016 to 9.3 million, primarily due to baby boomers reaching retirement age. After 2030, this growth is expected to slow slightly, although OAS basic beneficiaries are expected to reach 12.7 million by 2060.
For OAS basic pension annual expenditures, anticipated milestones are growth from $37.8 billion in 2016 to $80.3 billion in 2030 and $198.6 billion in 2060, states the report. It also expects age demographics to change, with the ratio of people aged 20-64 to those 65 and older falling significantly by 2060.
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The number of guaranteed income supplement and allowance beneficiaries is expected to increase by 59 per cent by 2016, but the GIS recipient rate is projected to gradually decrease, from 31 per cent in 2016 to 25.3 per cent by 2060. The report also expects annual expenditures for GIS will increase, from $11.2 billion in 2016 to $23.6 billion in 2030 and $47.1 billion in 2060. The decrease in the overall GIS recipient rate is expected to be due in part to the enhanced Canada Pension Plan benefits, which are to become payable, gradually, beginning in 2019.
OAS program expenditures in relation to gross domestic product have a projected ratio of 2.4 per cent in 2016. The ratio is expected to peak at 3.2 per cent in 2031 and slowly decrease to 2.7 per cent by 2060. The report notes the decrease will likely be due to slowed growth in inflation compared to growth in wages and GDP.
Total annual spending in the OAS program is expected to increase from $49 billion in 2016 to $104 billion in 2030 and $247 billion by 2060.
“The retirement of the baby boomers over the next few decades is projected to increase the expenditures of the program,” wrote Jean-Claude Ménard, chief actuary, in the report. “At the same time, it is expected that as the additional CPP benefits grow over time, an increasing amount of CPP income will be included in the determination of program benefits and, as such, lower numbers of recipients and amounts of benefits will result than would otherwise be the case.”
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Overall, age demographic assumptions for the Canadian population take a number of factors into account, states the report, noting Canada’s fertility rate isn’t likely to see another historical spike like the one that caused the baby boom. However, the rate is expected to increase, from the 2011 level of 1.61 children per woman to 1.65 by 2019.
Age-specific mortality rates are also declining, according to the report. Life expectancy after age 65 increased for both men and women by approximately five years between 1966 and 2011, creating a significant rise in the amount of time Canadians spend in retirement. Mortality improvements are expected to continue to rise but at a slower rate than during the noted period.
The continued aging of the Canadian population isn’t likely to alter due to net migration, unless immigration rises far above its observed trend, and the average age of an immigrant drops significantly, the report notes.
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