Today Canada's chief economist released revised estimates of the sustainability of Canada's OAS (Old Age Security) and GIS (Guaranteed Income Supplement) pensions, based upon the change in CHT payments which after 2016-17 will be tied to the GDP.
Canadian Parliamentary Budget Officer, Kevin Page, today released a new study on the economic impacts of the aging baby boomers, and their effects upon Canada's bottom line, financially speaking. Today, as CBC News reported, Mr. Page gave Canadians the good news that our Federal Pension Plans, which include the OAS and the GIS are, despite earlier assertions to the contrary, indeed sustainable, and not only sustainable but that there is enough room in the forecasted cash flow versus payments, to allow for some kind of enrichment of these programs. Enrichment could include higher benefit payments to ordinary Canadians, or perhaps could be applied to such issues as Pharmacare, but he said it is clear there is enough budgetary room to at least fund the programs as they are currently run.
Page had previously made predictions based on figures projected into the future based on past numbers, which had indicated that there was a potential problem with the sustainability of these programs.This prediction was because of the money which he had projected to be spent on the CHT, Canada Health Transfers, from the Federal Government to the Provinces for healthcare coverage, and based on the Federal Government's projected revenues into the future. After the Federal Government set a limit on those transfers such that they are tied to the GDP (Gross Domestic Product) after 2016-17, Mr. Page recalculated his projections of future expenditures versus income revenues. As a result he found that the single change in the CHT payments created a significant positive change in the finances available now to the Government for other expenditures. The OAS and GIS are paid for by general revenues, which are favourably affected by this change in Health Transfer payments, tying them to the GDP.
After his recalculation, Mr. Page discovered that indeed the "debt-to-GDP" projections indicate that the OAS and GIS are not only sustainable but could be expanded somewhat, perhaps paying higher benefits, which average on the whole about $508.35, as of the last Quarter of 2011. Higher income earners will find that the pension is prorated to the income level, and that after an income of $67,668.00 they will cease to receive the OAS, as they will not need it.
Page's findings clearly distressed the Government, as a frustrated and angry Finance Minister Flaherty revealed later in the day at a reporter "scrum". Julian Beltrame of the Canadian Press reported the story on the Yahoo News:
"An agitated Finance Minister Jim Flaherty called Page "unbelievable, unreliable, incredible" in a short scrum with reporters after question period, but did not contradict the PBO's numbers."
Yahoo news reported earlier today quoting an earlier CBC story:
"According to a federal government report from last June, the number of recipients of OAS is expected to almost double over the next 20 years — 4.7 million in 2010 to 9.3 million by 2030, mainly due to the retirement of the baby boom generation over that period.
Costs for the program are expected to rise 32 per cent over the next five years, from $36.3 billion in 2010 to $48.3 billion in 2015 and to $108 billion by 2030.
Relative to the size of the economy, Page estimates that the cost of OAS and other elderly benefits together will increase from 2.2 per cent of GDP in 2010-11 to a peak of 3.0 per cent of GDP in 2031-32. Then the cost will slide to 1.8 per cent of GDP by 2080.
His report says that with the new plan for the health transfers, Canada's fiscal framework is sustainable "even under the baseline assumption that there is some additional enrichment to elderly benefit payments.""
These projections do not take into account the possible budget cuts to be announced later this spring in the new Budget, and may be affected also by other policy decisions of the Government. But as he suggested it is a question of priorities rather than necessities, which translates into political will, and just how responsive to the needs of ordinary Canadians that the Conservatives can manage to find themselves, which is a question only time will tell.
Up until now the Government has not indicated just how they intend to alter the OAS and GIS systems, and have refused to offer comments in that direction, other than to say that their ideas would not affect current receivers of the Pensions, nor people about to retire and receive them. Further than that they have not revealed their hand. But it is safe to say that any pension reforms which entail losses or gains to seniors will be determined by political priorities, rather than economic and fiscal necessities, and it is also safe to say that the Conservative Government's future ability to govern will be closely tied in the minds of many Canadians, to their performance on this hot button issue, an issue of vital importance to Canadian seniors everywhere.