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Winnipeg Free Press - PRINT EDITION

Minister aims OAS message at young ears

Says they'll suffer without reforms

By: Heather Scoffield

Posted: 02/22/2012 1:00 AM | Comments: 0 (including replies)

Pawel Dwulit / The Canadian Press Diane Finley confirmed a detailed plan will be included in next month�s budget.

OTTAWA -- The federal government is stepping up its rhetoric to justify plans to cut public-pension benefits, but remains silent on how it will address seniors' poverty.

In a speech in Toronto on Tuesday, Human Resources Minister Diane Finley delivered the government's most nuanced discussion to date of its plans to reform old age security or OAS.

She confirmed a detailed plan would be presented in the budget, expected next month.

And she targeted her pitch at younger Canadians, saying they will face higher taxes, fewer social programs or larger deficits unless major reforms are started right now.

"We cannot allow ourselves to be pegged into a situation where we are faced with a choice between the country's financial security and our commitment to aging Canadians who have worked long and hard to build this great nation," she told a Canadian Club luncheon.

But Finley did not say anything about how the changes would affect low-income seniors who depend heavily on federal pension benefits to stay above water.

"A lot of Canadian seniors rely on this money," said Susan Eng, director of advocacy for CARP, an advocacy group for people over 50.

She attended the speech in the hope of learning more about the government's plans, but said she left annoyed and concerned about the future for impoverished seniors.

OAS is tightly entwined with the guaranteed income supplement or GIS, a top-up for low-income seniors. The two-part system is widely credited for dramatically reducing poverty among seniors over the last 30 years.

Now that Ottawa is poised to lay out a plan in the next budget that could raise the age of eligibility to 67 from today's 65, opposition members and a wide spectrum of experts have pointed to the need to consider vulnerable people over 60.

Government officials have made it clear that when cabinet ministers talk about reforming old age security, they are lumping in the guaranteed income supplement with the basic benefit that delivers about $500 a month to 98 per cent of Canadians over 65.

Unless Ottawa takes steps to separate the top-up from the basic old age security benefit, poor seniors would stay on provincial welfare rolls for an extra two years.

Government sources say Ottawa is currently in discussions with provincial governments on this topic.

And since low-income seniors die earlier than high-income seniors, the federal government would be cutting disproportionately into their lifelong retirement benefits, analysts note.

In 2006, the government's chief actuary found the average life expectancy at age 65 of people receiving the guaranteed income supplement was much shorter than the life expectancy of those too rich to receive OAS.

He found that for men, poorer seniors were dying 4.5 years earlier than the rich. For women, the difference was 3.4 years.

So chopping two years off their benefits would be far more punishing for the poor than the rich, said Michael Wolfson, a former senior official at Statistics Canada, now at the University of Ottawa.

"Cutting back on OAS, and more so GIS, hits those who not only are poorer, but also live fewer years to collect these benefits," he said in a note.

"This would really hit those with low incomes and (like the crime bills) could shift hundreds of millions in costs to provincial governments, since many in this age bracket might have to go on social assistance."

There are ways the government could raise the age of entitlement for old age security but still deliver an income supplement to low-income people under 67, experts say.

But so far, the government has focused the discussion on the need for the government to save money over the long run.

"We will need to ensure that our government has the fiscal room to meet the various needs of an aging population... without putting an undue tax burden on younger generations," Finley said Tuesday.

While other countries have acted to increase the age of eligibility to keep in line with aging populations, Canada has stood still, she said.

"It's ticking along as if things haven't changed demographically in 50 years."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition February 22, 2012 A8

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