Federal budget: OAS changes, but boomers get pass

reposted from: Ottawa Community News Mar 30 2012

Those who come after ‘me’ generation will have to wait longer to collect Old Age Security

Erich Bertussi is a member of a generation that never counted on government to come through for him with a solid retirement plan. So, the 38-year-old, a Gen Xer, said the news that Thursday’s federal budget pushes the date back for eligibility from 65 to 67 doesn’t surprise him, nor affect him much.

“I was pretty sure any government-funded retirement will not exist for my generation,” said the Hamilton self-employed marketer now seeking employment.

Certainly it’s the coming retirement of the boomers (those born between 1945 and 1964) who have triggered the reform of the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) programs.

Indeed, the boomers, otherwise known as the me generation, have dominated just about every economic and cultural force in North America, a tour de force in fact, with every step of their development.

As demographer David Foot once noted, boomers and their kids — the echo generation — command 52 per cent of disposable income in Canada.

Statistics Canada figures show an estimated 10 million baby boomers will move into senior citizenship in the next 20 years.

Finance Minister Jim Flaherty noted in his budget speech: “In the 1970s, there were seven workers for every one person over the age of 65. In 20 years, there will be only two. In 1970, life expectancy was age 69 for men and 76 for women. Today, it is 79 for men and 83 for women. At the same time, Canada’s birth rate is falling.”

However, changes to the OAS benefit actually skip the bulk of the boomer demographic.

The increase in age of eligibility of the OAS and the GIS will start in April 2023 — with full implementation by 2029. So, anyone 54 or older as of March 31, 2012, will not be affected.

Sherman Cheung, a McMaster economics professor, says while the government may suggest funding OAS is at the heart of the change, he said a more pressing issue may be the need to encourage boomers to stay in the workforce.

“This is one way to postpone (mass retirements),” he said. “I think it will save money for sure but you wouldn’t say this is extremely significant savings.”

Indeed, the government has also included a new provision, effective July 1, 2013, to allow for the voluntary deferral of the OAS pension for up to five years as a way to receive a higher pension.

Rolf Gerstenberger, president of United Steelworkers Local 1005, said most early retirement packages for members currently run until age 65, leaving a small gap.

But he said the real worry is for the majority of Canadians who don’t have pensions, relying on the social safety net.

“Instead of increasing the amounts given to seniors, they are taking it in the opposite direction. I look at this as one way … to lower everyone’s expectations.”

Bertussi said the expectations of his peers are simply different.

“Most people my age are trying to live fully now — shaving a day off to work four-day work weeks, trying to get a healthy lifestyle now rather than wait for retirement,” he said. “Every since I was a kid, I thought I’d be an entrepreneur … but in any job I thought I’d just keep on working while I was able-bodied.”

Quick facts

•  The OAS program is the largest program of the Government of Canada. The government projects the cost of the program to grow from $38 billion in 2011 to $108 billion in 2030.

•  The same period will see the number of working-age Canadians per senior fall from 4 today to 2 in 2030.

•  The average OAS benefit in January 2012 was $527.96 per month at age 65. Payments are adjusted for cost of living.

•  The average GIS (single) benefit (for those with an income of less than $16,368) in January 2012 was $492.26.

Source: Government of Canada

What they said

“Any plan that the government has, you count that into your retirement plans. That’s tough if they start changing things. If you have a small business then you’ve likely been putting money into RRSPs … we don’t have a pension plan. I don’t know when I’ll retire. Ours is a family business, my three daughters work here with me.”

— Brian Coruzzi, 59, owner of Sportscor Marketing on Ottawa Street

“No one is going to be able to retire anyway. A lot of people in our families have their own businesses. My grandmother (67) — a while ago I said, Hey, she can retire. She’s not, she’s still working. It used be the standard, retirement at 65. You can’t rely on a big wheel to help … you need to help yourself.”

— Melissa Height, 27, owner of Serious Monkey

“It’s interesting. I have pensions from CIBC and KPMG where I worked but it’s my own investments I’ll likely rely on. I’m right on the cusp between the boomers and Gen X. I always thought we’ll never see the (Canada Pension Plan and OAS) money … that’ll be vacuumed dry long before I get there. I’m of the view that if you can afford to retire, you likely don’t need the Old Age Security. My frustration is that (government) doesn’t look at the social safety net for seniors as a holistic package. We should be moving on to some program that really helps seniors who have struggled for years to make a living, send their kids to school and haven’t been able to put money away.”

— Linda Mitton, 47, partner at Cyberlis