Should wealthier seniors get less Old Age Security?

Writing in The Globe and Mail, Robyn Urback wonders if the federal government will consider taking the politically risky step of reforming Old Age Security – specifically, to tweak the system so that wealthier seniors get less.

Today, she notes, the OAS system is “an $80-billion-and-growing” program “that currently rewards couples who earn up to $182,000 with the full $18,000 annually.”

By comparison, she adds, Child Tax Benefit clawbacks begin at a level that’s $100,000 lower than the OAS clawback limit.

“The combined cost of both OAS and Guaranteed Income Supplement (GIS) payments is both the largest and the fastest-growing expenditure for the federal government, and it will become even greater if the government adopts the proposal from the Bloc Québécois to hike OAS payments by 10 per cent for seniors aged 65 to 74,” she continues.

Previous attempts to reform OAS have not worked out well, she writes.

Many may remember what happened when former Prime Minister Brian Mulroney tried to de-index OAS benefits (reducing payout adjustments for inflation), Urback notes. Political opponents called the decision breaking “a sacred trust,” and a protester outside Parliament, Solange Denis, told Mulroney “You lied to us. You made promises that you wouldn’t touch (OAS). It’s goodbye, Charlie Brown!”

Former Prime Minister Jean Chretien tried to roll the OAS and GIS programs into a new entity, the Seniors Benefit, which would have been based on “household income, not individual income.” He too backed down under political heat, Urback reports.

Finally, a third former Prime Minister, Stephen Harper, made an effort to “gradually” lift the age of eligibility for OAS from 65 to 67. This idea also became a political hot potato, the article continues, and was reversed by the government of former Prime Minister Justin Trudeau.

Will Prime Minister Mark Carney’s government look at changes to OAS?

“Mr. Carney’s pitch to voters was that he was not a lifelong politician in pursuit of a legacy, but a guy who would come in, try to fix things, and then, one could reasonably infer, get out. Who better, then, to make the politically tough but economically necessary decision to rein in OAS benefits?,” she writes.

The article notes that Generation Squeeze, “an advocacy group for young adults, has proposed lowering the threshold for OAS clawbacks to couples earning $100,000, which it estimates will save Canada’s coffers $7 billion per year.” Some of those savings, the group suggests, could be “redirected to low-income seniors,” low-income families and families with kids, or simply be used to pay down the national debt.

Reviving the Harper plan, and moving eligibility to age 67 gradually, would save $10 billion in federal spending per year, the article adds.

Urback concludes by calling OAS reform “a necessary move” that will have political consequences for the government, but will stop the “insane” practice of “handing out billions of dollars to wealthy seniors in this economic environment.”

It’s worth noting that the OAS payments that people receive are actually quite modest. According to the Art of Retirement blog the maximum OAS for those aged 65 to 74 is $706.7 per month “if your net annual income is less than $148,451.” For those 75 and over, it’s $880.40 a month if your net income is less than $154.196, the blog reports.

Once you pass those income milestones, the OAS recovery tax starts to kick in and reduces your payments.

If you don’t have a pension or retirement program through your work, you might want to augment your retirement income from government programs with your own savings.

A tremendous partner in this effort is the Saskatchewan Pension Plan. All you have to do is make contributions – and you can transfer in any amount from a non-locked-in registered retirement savings plan.

SPP invests your savings in a professionally managed, low-cost pooled fund, growing them for your future retirement income. Among your options at retirement is a lifetime monthly annuity payment from SPP, or the more flexible Variable Benefit option.

Check out SPP today!

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