Recently, many of you have voiced your concerns regarding Canada’s system of income for seniors.
I would like to take this opportunity to clarify things.
In Canada, there are three programs that provide income for Canadian seniors.
Those programs are the Canada Pension Plan (CPP), Guaranteed Income Supplement (GIS) and Old Age Security (OAS). CPP is funded through premiums that working Canadians contribute from every pay cheque. It was reformed by Finance Minister Paul Martin a decade ago and is fully funded for the next 70 years.
GIS – funded out of general taxation revenue – is a program that provides benefits for lower income seniors. Our government has significantly increased GIS benefits since 2006 and the program is fiscally sustainable.
However, OAS – also funded out of general taxation revenue – is not on a fiscally sustainable path. Because of Canada’s rapidly aging population, the OAS program will not be sustainable in 20 years.
Today, there are 4.7 million Canadian seniors and four taxpayers for every senior. By 2030, there will be 9.3 million seniors and two taxpayers for every senior. If left unchanged, OAS payments will skyrocket from $36 billion per year in 2010 to $108 billion per year in 2030 – consuming one quarter of total government program spending in 2030.
Clearly, that is not sustainable and why it is important for us start a discussion on the OAS program. If OAS is not reviewed, drastic actions will need to be taken a decade from now and future generations of Canadian seniors may have their pensions jeopardized.
Any changes contemplated to OAS will not affect anyone currently receiving benefits, nor will it affect Canadians close to retirement. Other Canadians will receive significant notice of changes to OAS so that they have enough time to plan for their future.
The government is also conducting reviews on other expenses, including MP pensions. We have already reduced the cost of parliament by more than four per cent over the last three years, by freezing the wages of MPs and ministers. We will continue conducting reviews and considering cost-saving options.
Our government has a record of taking action to support Canadian seniors. Since 2006, we have enhanced the GIS for seniors, introduced pension income splitting, increased the age credit and introduced new programs such as the Tax-Fee Savings Account (TFSA) and the Pooled Registered Pension Plan (PRPP) to help Canadians save for retirement.
We will not put the financial security and well-being of our seniors at risk. Instead, we will take a balanced and responsible approach to ensuring that OAS is sustainable for future generations.
The government is currently considering options for the future of OAS, but one thing is clear: there will be a lengthy notice period for any changes, and retired Canadians or those close to retirement will not be affected.
I encourage you to contact me if you have any questions about OAS. You can contact me by phone at (866) 878-5556 or by email at michael.chong@parl.gc.ca.