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Federal Budget 2012 – supplementing the affluent?

Apparently “budget” is not a politically correct term any more.  It’s now an “Economic Action Plan.”  Regardless of what you call it, the Canadian Economic Action Plan is going to be tabled in the House of Commons on March 29th.   Who cares?  Well, we all should because the decisions that are made will make a difference in our wallets (through changes in tax rates) and our quality of life (through changes in service levels).


The policy topic that has received a lot of buzz lately is the potential reform of Canada’s Old Age Security (OAS). Human Resources Minister Diane Finley made her case for reform in Toronto in late February.   She clarified in her remarks that it is not the Canada Pension Plan (CPP) that is being discussed.  For CPP, employers and individuals contribute specifically to that plan through earnings.   The program up for reform is OAS, which is funded through tax dollars and is available to Canadians regardless of employment status.
Currently, the maximum basic OAS payment for eligible Canadians is $540.12 per month.  These payments are taxable.  If the recipient’s total income is more than $69,562 (the 2012 clawback threshold), then the OAS must be repaid at a rate of 15% of the amount over the threshold to a maximum of the total amount of OAS received.


The government has indicated that they will not be changing benefits for those who are currently retired or close to retirement.   A lot of theories have been put forth as to what the OAS reforms will be.  Canadian Business reports that the leading theory is that the age of eligibility will be raised to 67 from 65.    Despite the fact that the age to collect was 70 when OAS was first introduced in 1952, I think it’s a bad idea to raise the age of eligibility – even with a long phase-in period to allow for proper planning.   What about those low-income seniors who are not able to remain in the workforce for another two years?


If reform is truly necessary, why isn’t more attention being focused on the clawback threshold?   Does someone making almost $70,000 per year really need OAS?  Let’s spend social safety net dollars where needed, not on supplementing those who can already afford to support themselves.
July 30, 2012

3 responses on "Federal Budget 2012 - supplementing the affluent?"

  1. Do you see any benefit in encouraging employment beyond 67 and providing an increased OAS when employment ceases or a reduced OAS if the choice is made to cease employment earlier?

    • This is an interesting idea. I like the fact that it gives people a chance to choose based on their own circumstances. The philosophical problem is that OAS is not linked to employment. If you’ve lived in Canada for a certain number of years and are a citizen/legal resident, you receive the payments whether you have previously been employed or not. If we remove the employment condition and allow people to choose, I still think that the full payment should be available at age 65 (with perhaps a lower amount available at age 60). Personally, I don’t want to see any legislation that could penalize people in their sixties (either now or in the future after the phase-in period for new legislation) who have lower incomes. I don’t think that OAS is the place for saving money unless the cutbacks affect only those who don’t need OAS in the first place (i.e. those with higher incomes).

    • Amen & amen to your article! In a peecrft world, we would all be able to work toward a retirement income of about the claw back’ limit, but the world isn’t peecrft. Some of us are victims of loss of our spouse at an early age, loss of employment and no other means of living than to rely on savings & investments, and God forbid that the last market crash took 1/2 of our investments. And, closing in on retirement age, I don’t think a Walmart greeter (or similar) is going to make enough to put us over that claw back limit.Mary

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