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In my previous two MP reports I have discussed the OAS in context with the changes occurring in Canadian demographics to the extent that by 2030, our population of citizens who are over 65 will double. The fact that the amount of citizens over 65 will double from currently 4.7 million today to 9.3 million by 2030 is not, in itself an alarming concern. However what must also be taken into context is the other important changes occurring to Canadian demographics. As I mentioned in last week's report in 1975 there was a ratio of 7 working taxpayers for every citizen over 65. Today that ratio has been reduced down to 4 taxpayers per retired senior. However by 2030 that ratio will be further reduced down 2 working taxpayers per retired senior. Why does this matter?
Critics have suggested that these pending changes to our population should be ignored and are of no significance. I respectfully disagree. Over the past weeks I have been further researching this subject and I do believe that there is a legitimate cause for concern. Critics have suggested that the future increase in OAS spending, in spite of consuming a larger share of our national GDP, is "manageable" and is really an issue of spending priorities. While this may sound like a reasonable claim, it is also very important to understand where this money will ultimately come from. Many citizens may be unaware of this fact however the single largest source of revenue for the Federal Government is from income tax. Nearly 50% of all Federal Revenue, a total of $ 113.5 billion, comes off the top of your pay check. By comparison the GST as a revenue source provides just over 10% of government funding at $ 28.4 billion. From a revenue perspective the fact that income tax contributes almost half of all federal government funding as the single largest revenue source is significant. When one considers that the ratio or working taxpayer's to citizens over 65 has gone from 7:1 in 1975 and will further decline to 2:1 by the year 2030 it is clear that not taking action today will create problems in the future. I am not suggesting that there is a crisis, however with income taxes comprising nearly half of all government revenues combined with fewer working taxpayers in the years ahead ultimately means there will less people trying to pay an increasingly larger bill. On the spending side it must also be noted that OAS is only one of many benefits provided under Canada's vast social safety net. Total current spending on support for the elderly is roughly 13% of the entire federal budget at $36.6 Billion. The child benefit program by comparison is less than half of this amount at $12.7 billion while Health transfers to the provinces are currently $26 billion. It should also be noted that currently Canada is paying $ 30.9 billion a year in debt serving costs. I have in the past pointed to the challenges that other countries, most notably Greece, are facing from the inability to take proactive actions and maintain public spending within what taxpayers can afford. Even France, one of the most prominent countries in the European Union, faces challenges since its credit rating was recently downgraded, placing more debt pressure on its citizenry. Generally speaking few problems are created overnight and most are decades in the making. Many citizens have rightfully pointed out that Canada is a country rich in resources however it must also be noted that our Government is actively trying to open up alternative markets to those resources and often the very projects that help to achieve these important goals are also opposed. Canada is a country that was build on hard work and if we are to keep Canada strong as a nation we must accept the importance of taking proactive actions to ensure that we have the resources needed to provide the services that Canadians can depend upon but also that Canadian taxpayers can afford. Our Government will continue to work towards these important goals. Dan Albas is the Member of Parliament for Okanagan- Coquihalla and can be contacted at dan.albas@parl.gc.ca
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I was reminded this past week of my relative newness as a Member of Parliament. Although it has been almost eight months since being sworn in to serve, I must confess that I have not developed the kind of ‘thick skin’ or ‘water off a duck’s back’ attitude that I witnessed by some of the more experienced politicians, particularly when faced with a controversial issue. After hearing some recent comments made publicly about the OAS and pensions in general I feel compelled to respond. I would like to again clarify that there has been no discussion whatsoever about reducing the OAS benefits to retired seniors. For the record our government has been firm in the commitment to retired seniors that OAS benefits will not be reduced in any way. Likewise our Government has also made the same commitment for those taxpayers who are near retirement. Our Government has further confirmed that no changes to OAS benefits would occur that did not include a substantial notice of change to younger taxpayers.
To be clear, the changes coming to Canadian demographics are not a political issue, they are a reality. Over the next two decades the amount of Canadians over the age of 65 will double. When OAS was first created in 1952 the age eligibility was 70. Interestingly enough the average life expectancy at that time was 66 for men and 71 for women. I expect not many Canadians lived long enough to qualify and likely that was part of why the OAS qualifying age was lowered from 70 to 65 in the year 1965. The good news for Canadians is that today the average life expectancy is 79 for men and 83 for women. This is why today OAS represents annual spending of $ 36 billion and based on the aging of our population is expected to rise to $108 billion in the year 2030. Critics have pointed out that as a percentage of the GDP this represents a spending increase from roughly 4.5% of current GDP to roughly 6.2% in 2060 (depending on what forecast you follow). That may not in itself seem like a significant increase; however there is another important fact that must also be taken into consideration. In 1975 there was a ratio of 7 working taxpayers for every retired senior. Today that ratio is almost cut in half and has been reduced down to 4 taxpayers per retired senior. More importantly by 2030 that ration will be further reduced down 2 taxpayers per retired senior. If OAS were the only program funded under Canada’s vast social safety net then likely it would be easier to ignore this trend as most critics suggest should be done. However I have also heard from retired teachers and retired members of the British Columbia Government Employees Union who have shared some of the challenges that occur if a long term view is not taken in the funding of pension plans. I would also like to clarify that I am not suggesting there is a crisis; only that as Canadian taxpayers we need to recognize that in the future we will have fewer taxpayers supporting our vast social safety net at a time when Canadians are living longer. Before I sign off on this week’s report I would like to thank the many of you who have taken the time to share your views with me on this important subject. I will continue to take comments and suggestions forward. While I have heard both support and opposition for taking a proactive approach on the OAS, one area where I have heard a consensus is that no OAS reform should occur without similar considerations being applied to the MP pension plan. I have taken your views to Ottawa and for the record I will vote in support of changes to the MP pension plan that are more respectful to the taxpayers of Okanagan-Coquihalla. The topic of pensions has again been on the minds of many citizens and in particular seniors within the riding of Okanagan Coquihalla this past week and has also been actively covered in many Canadian media reports. I would like to clarify to seniors who current receive the OAS benefit that there will be no changes to the benefits you currently receive. Likewise to the citizens who are very close to reaching retirement age I would also like to confirm that no change would occur without substantial notice and an accompanying adjustment period to ensure that sufficient time is provided to adjust and plan appropriately for your retirement.Our government remains committed to the retirement security of Canadians, however we must also be proactive to ensure that we have retirement security that Canadian taxpayers can afford that seniors can depend on.
Going forward over the next two decades we know that the amount of Canadian citizens over the age of 65 will basically double from roughly 4.7 million seniors today to over 9.3 million by 2030. We also know that today seniors are living longer and healthier lives than ever before, a fact that Canadians can all take pride in. However we must also recognize that more seniors collecting OAS benefits with fewer workers to fund those same benefits will create a very serious situation if ignored. In terms of numbers the total annual payout for OAS benefits is expected to rise from the current amount of $36 Billion a year today to $108 Billion by 2030. Today there is a ratio of basically four working taxpayers helping to fund OAS benefits to retired seniors. By 2030 this ratio will be cut in half down to two working taxpayers attempting to fund OAS benefits. This is an unsustainable situation and is the reason why a new balance must be found in order to secure the future of this important program. Understandably any proposed changes to OAS are a cause for concern to all Canadians, however we cannot ignore the changes to the demographics of our society and run the risk that countries such as Greece are currently encountering with an inability to meet financial obligations. Over the past six years our Government has introduced increases to the GIS, pension income splitting, increase age credit and the tax free saving account (TFSA) As a result of these changes a single senior can now earn $ 19,000 per year ($ 38,000 as a couple) before paying any federal income taxes. We have also lowered the GST rate to ensure there is less tax on your after tax spending. The majority of these initiatives were opposed by the opposition. I expect further proposed changes will potentially also be opposed. While there may be disagreement and debate on how best to secure the long term future for retired Canadians, I am hopeful that we can all agree on the need to be proactive today and not reactive in the future when our options may be limited. Dan Albas is the Member of Parliament for Okanagan- Coquihalla and can be contacted at dan.albas@parl.gc.ca The topic of pensions has again been on the minds of many citizens and in particular seniors within the riding of Okanagan Coquihalla this past week and has also been actively covered in many Canadian media reports. I would like to clarify to seniors who current receive the OAS benefit that there will be no changes to the benefits you currently receive. Likewise to the citizens who are very close to reaching retirement age I would also like to confirm that no change would occur without substantial notice and an accompanying adjustment period to ensure that sufficient time is provided to adjust and plan appropriately for your retirement.Our government remains committed to the retirement security of Canadians, however we must also be proactive to ensure that we have retirement security that Canadian taxpayers can afford that seniors can depend on.
Going forward over the next two decades we know that the amount of Canadian citizens over the age of 65 will basically double from roughly 4.7 million seniors today to over 9.3 million by 2030. We also know that today seniors are living longer and healthier lives than ever before, a fact that Canadians can all take pride in. However we must also recognize that more seniors collecting OAS benefits with fewer workers to fund those same benefits will create a very serious situation if ignored. In terms of numbers the total annual payout for OAS benefits is expected to rise from the current amount of $36 Billion a year today to $108 Billion by 2030. Today there is a ratio of basically four working taxpayers helping to fund OAS benefits to retired seniors. By 2030 this ratio will be cut in half down to two working taxpayers attempting to fund OAS benefits. This is an unsustainable situation and is the reason why a new balance must be found in order to secure the future of this important program. Understandably any proposed changes to OAS are a cause for concern to all Canadians, however we cannot ignore the changes to the demographics of our society and run the risk that countries such as Greece are currently encountering with an inability to meet financial obligations. Over the past six years our Government has introduced increases to the GIS, pension income splitting, increase age credit and the tax free saving account (TFSA) As a result of these changes a single senior can now earn $ 19,000 per year ($ 38,000 as a couple) before paying any federal income taxes. We have also lowered the GST rate to ensure there is less tax on your after tax spending. The majority of these initiatives were opposed by the opposition. I expect further proposed changes will potentially also be opposed. While there may be disagreement and debate on how best to secure the long term future for retired Canadians, I am hopeful that we can all agree on the need to be proactive today and not reactive in the future when our options may be limited. Dan Albas is the Member of Parliament for Okanagan- Coquihalla and can be contacted at dan.albas@parl.gc.ca |
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March 2023
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