One of the big concerns in Canada is the number of baby boomers that are going to retire and put pressure on the retirement income system. The two key components of the retirement income system in Canada is the Canada Pension Plan (CPP) and the Old Age Security (OAS).
The CPP program was reviewed in 2009 and it was determined at that time, CPP was well funded and on solid financial ground. CPP will be there for Canadians.
Last week, OAS was the hot topic when Harper made some comments at the World Economic Forum in Davos, Switzerland about making some significant changes to those elements of the Canadian retirement system that are not properly funded. Now the big question is Do You Think Old Age Security needs change?
In doing some research on OAS, I found some interesting data that I thought would be worthwhile sharing:
- Canada's first public pension plan had been introduced in 1927 with the passing of the Old Age Pensions Act. That legislation established a means-tested pension for men and women 70 years of age and over who had little or no income.
- The Old Age Security Act came into force in 1952, replacing legislation from 1927 requiring the federal government to share the cost of provincially-run, means-tested old age benefits.
- Back in 1952, OAS paid a $40 per month universal, flat-rate pension for people 70 and over, with 20 years residence in Canada immediately prior to the approval of an application as sufficient qualification. 308,825 people were participating in the program
- In 1965 the age of eligibility was moved from age 70 to age 65 over a 5 year period (to 1969).
- In 1967, the program was expanded with the Guaranteed Income Supplement (GIS). The GIS program was and still is a tax-free, income-tested supplement to pensioners in receipt of the Old Age Security Pension, but with little or no other income.
- Indexation of benefits was introduced in 1972
- In the 1996 budget, a new Senior Benefit was introduced that would replace OAS, GIS and 2 tax credits for seniors. Although the government argued that 75% of seniors would have the same benefit or higher, the proposal never materialized.
- In 2000, benefits and obligations were extended to same sex common law partners as well
How much does OAS pay?
Currently (2012) Old Age Security pays a maximum of $540 per month at age 65. You cannot collect OAS earlier than that. If you don’t apply, you don’t automatically get it. You must apply.
OAS is also income tested so Canadians need to be aware of the OAS clawback.
Before the government messes around with OAS and cuts the retirement income of Canadians, I think they need to look at their own lucrative MP Pensions which is costing taxpayers a lot of money. Canadians, you need to voice your thoughts before any changes are made to Old Age Security.