Old Age Security explained
OTTAWA — The future of Canada's public pension system is suddenly the hottest political issue on Parliament Hill. So what's on the table for reform, what's known about the changes that might happen and how might it affect you?

Here's a primer on what you should know:

Q. What is Old Age Security?

A. OAS is the centrepiece of the country's public pension system, funded entirely by government revenues. It's available to any Canadian citizen or permanent resident who has lived in the county for at least 10 years. People qualify at age 65. The maximum payment is $540.12 a month for seniors with less than $69,562 in annual net income. The payment is gradually clawed back for those above that income threshold, until it disappears for those earning more than $112,772.

Q. What's the problem?

A. Baby boomers are heading toward retirement, and there will be fewer Canadians in the workforce to pay taxes to government. Without change, says the government, OAS will balloon in size and cost — from 4.7 million recipients (costing $36.5 billion) in 2010 to 9.3 million people (costing $108 billion) in 2030.

Q. What's the government plan?

A. Prime Minister Stephen Harper says he will make changes to the pension system to ensure its "future sustainability for the next generation while not affecting current recipients." The government is tight-lipped on specifics, but pledges an "adjustment period" so reforms don't hurt Canadians "close to retirement."

Q. What are the options?

A. There are no final decisions, but the government is examining changing the age of OAS qualification — to 67 from 65. Conceivably, it could also remove inflation protection to OAS benefits, or lower the income threshold at which benefits are clawed back from people.

Q. What do opposition parties say?

A. They have pounced on the issue, promising to protect pensioners and blasting the Tories for not mentioning this plan in last year's election.

Q. How could this affect you?

A. It depends on what your annual income is and how close to retirement you are. If you have a high income, OAS benefits probably wouldn't factor into your retirement plans anyway. If you are much younger and earn an average income, expect to get less by the time you retire.

Q. Will this affect the Canada Pension Plan?

A. No. It is a separate fund, available to Canadians who were in the workplace. It is actuarially sound and won't be touched.

Q. What about the pooled pension plan?

A. This is a separate scheme planned by the government to persuade people to prepare for retirement. Small businesses that want to offer pensions for employees can have a regulated financial institution oversee the plan. It won't be mandatory for businesses to participate and the government will not contribute. If a plan exists, employees will be automatically enrolled for payroll deductions but can opt out.

Q. What about the Guaranteed Income Supplement?

A. This is paid to seniors who make less than $16,368, with a maximum monthly benefit of $732.36 per month. There is no indication if that will change. If the government increases eligibility to 67 from 65, provinces will complain that leaves more poor seniors on their welfare rolls for an extra two years.

Q. Will pensions for bureaucrats and politicians be changed?

A. No decisions yet, but if OAS is changed, it's likely public servants and MPs will see changes to their pension plans.


mkennedy@postmedia.com

Twitter.com/Mark_Kennedy_

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