A new Intelligence Memo from the C.D. Howe Institute looks at Bill C-319, An Act to amend the Old Age Security Act (amount of full pension), currently stalled in the House of Commons, according to the briefing, and implores policy makers to use the opportunity to reflect on the broader retirement income system in Canada.
The private member’s bill backed by the Bloc Québécois increases Old-Age Security (OAS) benefits by 10 per cent to those between ages 65 and 74, to equalize benefits with those already over age 75. The bill has been estimated to cost $3-billion annually. It would also amend Guaranteed Income Supplement (GIS) to permit low-income seniors to earn up to $6,500 a year, up from $5,000, before benefits are clawed back.
“Members of Parliament and policymakers should assess the appropriate balance between the basic OAS and GIS over the long term,” the institute’s memo states.
Entitled Pension Bill Paralysis Provides Useful Chance for Broader Thinking, the note also points out that studies have documented that people with low earnings get little benefit from their compulsory contributions to Canadian Pension Plan (CPP) benefits once the loss of GIS benefits and provincial top ups are taken into account. “The increase in the earnings exemption provides some welcome relief to the disincentive to take employment. It can also be viewed as a small recognition of a substantial problem with disincentive effects,” they write.
They add that a significant portion of the spending proposed will go to those who are likely employed still.
“With Bill C-319 stuck in the House, one hopes both the government and the opposition parties will take the opportunity to reflect on the OAS and GIS balance and on the interconnected nature of the many components of Canada’s retirement income system. Unfortunately, many advocates on retirement income issues tend to promote compartmentalized program changes – like for OAS or GIS – without thinking through the impact on other components of the system. Generally, governments have been too willing to support these causes. Stalling on Bill C-319 may create an opportunity for useful reflection on the broader retirement income system,” they conclude.