A Real Platform Should Eliminate Seniors' Poverty
Despite the big investments Canadians make to support retirees, about half-million seniors still struggle with poverty. This fact alone should make us rethink our Old Age Security system – and whether the $86 billion we’re spending on it this year alone is achieving the outcomes we want.
A Canada that works for all generations should lift all seniors out of poverty. If party leaders say we can’t afford it, you need to know that they’re duping us. This goal is squarely within our grasp – and achieving it doesn’t require more taxpayer dollars.
What You Need to Know to Avoid Being Duped
This election, all parties should commit to delivering an additional $5,000 to each of the half-million retirees who fall below Canada’s official poverty line. The $2.5 billion annual cost could be covered by scaling back slightly the cash benefits that retirees with household incomes above $100,000 receive from Old Age Security (OAS). This change would affect just 1 in 5 retirees.
Some will bristle at the idea of any reduction to OAS, believing they deserve this support because they paid taxes throughout their working years. But OAS is not the Canada Pension Plan (CPP). Today’s retirees have not paid into the program in proportion to the benefits they now receive – even if they worked hard and paid taxes according to the rules of the day.
In anticipation of the baby boom cohort aging, the government changed CPP so Canadians could collect a benefit relatively proportionate to what they contributed. Sadly, Ottawa didn’t do the same for OAS. It remains a government subsidy paid to whomever is eligible – and eligibility rules are far more generous than for most other cash benefits.
Ottawa claws back the Canada Child Benefit from families with kids when their household income surpasses $79,000. By contrast, retired couples can have $180,000 in combined income before OAS payments are reduced. This disparity persists even though compared to young families, retirees have the lowest rates of poverty, the highest levels of wealth, and a great deal of housing security (since 70% are home owners).
It’s reasonable to ask retirees with incomes over $100,000 to take less from OAS so that we can deliver more support to their economically vulnerable peers. OAS was designed at a time when other retirement supports – like CPP and pension income splitting – weren’t in place. Now, the generosity of OAS for affluent retirees is a primary reason we leave a half million seniors in poverty, and rack up large deficits that our kids and future generations will inherit.
Happily, others agree that the time has come to rethink Canada's retirement policies.
The C.D. Howe Institute recently concluded that, since seniors "are now the age group in Canada least likely to live in poverty... the historical emphasis on preferential taxation of the elderly [is] inappropriate"... "Scarce tax dollars should not be allocated to a cohort with a lower incidence of low-income than many others."
Three-quarters of Canadians also stand behind the need for changes to OAS - including three-quarters of retirees, some of whom would be directly affected by the changes we propose. Are you one of them? They're raising their voices to urge all parties to act. If you want to join them, let us know!
Dupe-O-Meter Party Assessments
Since the federal government already spends more money on retirement income security than any other budget line, there’s no reason why any senior in Canada should live in poverty. The fact that half a million still do is a problem we need to fix.
The good news is that a solution is well within our reach – and it doesn’t even require any additional contributions from taxpayers. So it’s surprising and disappointing that no party is making the elimination of seniors’ poverty a goal this election.
The solution lies in dealing with the reality that we no longer spend OAS funds wisely.
In the midst of an affordability crisis, OAS sends an $18,000 annual subsidy to retired couples with household incomes that reach $180,000 – and does so using borrowed money. By contrast, families raising kids start losing the Canada Child Benefit (CCB) when their household income surpasses $79,000.
Although the Auditor General recently exposed that OAS hasn’t been updated since its creation in 1952, no party is proposing to bring this program into the 21st century.
The primary change that’s needed is to modernize the clawback threshold, bringing it more in line with the clawback for the CCB. Doing so would generate savings that could virtually eliminate seniors’ poverty, giving each poor senior an additional $5,000 every year.
It’s surprising the no party has embraced this plan – or proposed another concrete way to make sure our seniors are able to live above the poverty line. The Liberals and Conservatives think they can dupe you by silently neglecting this issue - despite the top-of-mind concerns many voters share about rising living costs. The NDP take a different tack, heading down slogan central. They offer a vague pledge to “lift all seniors out of poverty” with little to back it up.
Here's a summary of the (unambitious) measures that the Conservatives, Liberals and NDP have promised for retirees.
Conservatives
Mr. Poilievre’s party focuses on helping those over 64 who are still in the labour market. The Conservatives would permit these seniors to shelter another $10,000 of earned income from taxation, a promise worth $1,300 per year.
The announcement implies that party is concerned about working poor seniors, which is laudable. However, any senior who earns income in the labour market could make use of their proposed fix – regardless of need. Some working seniors will be affluent individuals who continue to work because they choose to, not out of economic need. It’s unclear that extending a tax shelter for the former group is a good use of scare taxpayer funds, especially at a time when many people are facing real affordability pressures.
The Conservatives will also provide retirees more flexibility to shelter from taxes the income they previously saved in an RRSP. Mr. Poilievre’s plan would let them shelter that income for another two years beyond the current policy.
Liberals
For the next year, Mr. Carney’s party would offer an additional $652 to each low-income retiree who receive the Guaranteed Income Supplement. That’s just 13% of the $5000 we recommend to lift seniors out of poverty – and our proposal would deliver this additional support on an ongoing basis.
Like the Conservatives, the Liberals would give retirees more flexibility to shelter from taxes income previously saved in an RRSP. That’s what the party means when it promises to “reduce the minimum amount that must be withdrawn from a Registered Retirement Income Fund (RRIF).”
NDP
Mr. Singh’s NDP promises to “lift all seniors out of poverty by raising the Guaranteed Income Supplement (GIS).” This is a worthy goal – so it’s disappointing that the commitment is made in just one line of a March 26th party announcement.
So long as no further details are provided, this promise is a press release – not a real platform commitment to which the NDP can be held to account.
How much will the GIS be raised by? What will this new measure cost? How will we pay for it?
It’s unclear if the NDP’s pledge to eliminate senior’s poverty will be realized by more fairly and efficiently spending existing OAS funds. Or does the party propose to leave the $18,000 subsidy in place for retired couples with incomes that reach $180,000?
This underscores why all parties should be required to develop detailed, costed platforms voters can trust.
