Reforming Old Age Security: A Good Start But Incomplete

Fraser Institute, October 2013

41 Pages Posted: 6 Oct 2013

Date Written: October 1, 2013

Abstract

In 2012, the federal government implemented changes to Old Age Security (OAS), one of three key income programs for seniors. While the main reform — an increase in the age of eligibility — is a positive first step in reforming programs for seniors in the face of historic demographic change, it is only a first step.

The most prominent reform announced in the 2012 Budget concerning OAS is an increase in the age of eligibility to receive full OAS benefits. The announced changes will not affect anyone born before March 1958. Specifically, the age of eligibility will be increased to 67 years of age from its current level of 65 years of age starting in 2023, with the change fully implemented by January 2029.

It is worth noting the modest nature of the two year increase in the age of eligibility. Consider that every year that life expectancy increases, the total benefits paid under senior programs also increase but without any specific action on the part of the government. In other words, these benefit increases occur automatically as a function of increases in life expectancy. If, however, the government had indexed the age of eligibility to life expectancy in say 1966, when the CPP was introduced, the age of eligibility for OAS today would be 74 years of age.

While the federal government should be applauded for its willingness to tackle a sensitive and controversial issue, the changes made to OAS are a first step in what needs to be a much larger process.

Keywords: Government Spending

Suggested Citation

Clemens, Jason and Palacios, Milagros and Veldhuis, Niels, Reforming Old Age Security: A Good Start But Incomplete (October 1, 2013). Fraser Institute, October 2013, Available at SSRN: https://ssrn.com/abstract=2336306

Jason Clemens (Contact Author)

Fraser Institute ( email )

1770 Burrard Street
4th Floor
Vancouver, British Columbia V6J 3G7
Canada

Milagros Palacios

Fraser Institute ( email )

1770 Burrard Street
4th Floor
Vancouver, British Columbia V6J 3G7
Canada

Niels Veldhuis

Fraser Institute ( email )

1770 Burrard Street
4th Floor
Vancouver, British Columbia V6J 3G7
Canada

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