Thank you for the invitation. I will speak only to the income security goal.
As my fellow economist, Professor Tammy Schirle, told you two weeks ago, the reduction in senior poverty is a great Canadian policy success, from close to 70% 45 years ago to about 13% in 2015. No other country has done as well.
However, about 10 years ago, senior poverty was down to 6%. It has in fact been increasing recently. Why is there this recent increase in measured poverty in the older population? There are many seniors who are almost entirely dependent upon OAS and GIS, and that puts them very close to the most commonly used poverty cut-off, which is called the low-income measure. The low-income measure increases with wage inflation. OAS/GIS is indexed by price inflation. In what is overall good news, wage inflation has recently been greater than price inflation, so a fair number of seniors, especially the currently unmarried, who would have been just above the cut-off, are now somewhat below. These seniors, on average, might have the same standard of living they had 10 years ago, which no one would say is high, but on average they are also relatively poorer when compared to current wage earners.
How do we move forward? That's very much a matter of value judgments; hence, everyone's answer is going to be personal. Along with what other witnesses have said, I think one key is to increase the number of seniors who are earning wages and not receiving as much OAS and GIS. I think everyone understands that the OAS/GIS system becomes a lot more expensive if you keep the age of retirement at 65 while average longevity increases from 72 years of age to 80 years of age to more.
Many countries, from Sweden to the United States, have increased the age of eligibility for public pensions or public transfers to the older population. More senior labour force participation also increases average productivity, average incomes, and tax revenues. Of course, any increase in eligibility age would have to be very gradual, with the full increase taking decades, not years.
For some seniors, an increase in the OAS/GIS eligibility age would be an excessive hardship because they have already lost their jobs with no prospect of finding a new one. Some will have bad health. They may be just hanging on until they get into the OAS/GIS system.
Your witness Richard Shillington had a suggestion to keep GIS eligibility at 65 and only delay OAS eligibility, all designed so there would be no effect on poor seniors. As the new system matured, more fortunate seniors would work longer, but these people would also be the ones benefiting from what we expect to be a continued and wonderful trend to greater longevity and more years with good health.
Let me reinforce another point Richard Shillington made. Potential GIS recipients should not be contributing to RRSPs, at least until they have maxed out on their TFSAs.
I wrote an article about this in the Canadian Tax Journal , as well as a couple of op-eds. As an example, suppose someone I will call Chris is 64 and puts $1,000 in an RRSP. Chris is in the 20% tax bracket and therefore gets a tax refund that year of $200. Then Chris becomes eligible for GIS at age 65. Now when Chris takes that $1,000 out of the RRSP, it is going to cost Chris much more than $200. The GIS clawback will be at least $500, and with other clawbacks and tax, it is possible to lose the whole $1,000. Furthermore, if someone knows they are going to be GIS eligible, it is often better to take money out of an RRSP at age 64 and pay the tax on it then, rather than be subject to the clawback, especially if it enables a larger TFSA contribution.
It is actually hard to know what to do about this in terms of public policy. Perhaps that will come up in questions. Maybe we can collectively do our best to inform our fellow citizens, your constituents, who are not yet GIS recipients but will likely be when they are 65, to use TFSAs rather than RRSPs as their primary saving vehicle, and if they already have significant RRSP holdings, they may benefit from consulting a financial planner immediately.
Thanks very much.