Since Prime Minister Harper’s surprise announcement at the billionaire’s conference in
, reforms to Old Age Security (OAS) have been hotly debated.
Often mentioned is that by 2030 we will have a peak level of seniors, and their benefits will cost about 50% more of our GDP than now. So how to prepare over the coming two decades?
The first thing to put on the table is the purpose of OAS. It is not an earned pension; you don’t pay into it, it isn’t saved up, you don’t earn it. Any Canadian over 65 receives it, regardless of how much, or how little, they contributed to society over their lifetime. Lifelong workhorse or surly slacker, struggling single mother or comfortable trust-fund loafer, recipient of a 25-year prison sentence or an Order of Canada – you are eligible for the exact same benefit.
The pensions you earn and save are CPP, your RSPs, and (if you have one), your employer pension. No reform should take these away from anyone.
But OAS was created before CPP, before RSPs, before most people had workplace pensions, and designed to provide basic security for the elderly, keep them off the streets and out of food banks.
Yet now it’s treated like an entitlement, a little monthly perk. Full OAS continues almost up to $70,000 income, and you still receive some past $110,000! To put this in perspective, median Canadian income is around $30,000, which means half of us get by on less. So the first reform for OAS is to stop giving it to those who make double the average income, and target more toward those struggling to get by on less. Start the reduction at $45,000 and phase it all out by $70,000. (Keep in mind that retirement income is pegged at 70% of working income, so a pension of $70,000 is like a salary of $100,000.) We taxpayers need to help our struggling seniors, not give mad money to snowbirds.
But rather than delay benefits to 67, as the Conservatives have suggested, how about adopting the age flexibility of CPP. That way, you could start benefits as early as 60, at a lower rate, or delay as late as 70, for a higher monthly cheque. This way, those in the most need are not left behind.
But most important, let’s reduce our need for seniors’ welfare altogether, by strengthening our contributory pensions. Increase CPP contribution rates and benefits. Allow people to voluntarily top-up CPP as if their income were at the yearly maximum pensionable earnings (YMPE). Protect private pensions from bankruptcy and corporate raiders.
The better we can save for retirement, the less we’ll need government to look after us, and the better we’ll feel about it.