Madam Speaker, I am pleased to rise today to explain why the government will be opposing this motion. I am also pleased to say that I am very flattered that the opposition seems to be using my comment again and again. Obviously, repetition is something that is quite flattering, and I greatly appreciate it.
In budget 2012 our government indicated the changes that will be made to the old age security program to ensure the sustainability of the program for future generations. This morning our government tabled the jobs, growth and long-term prosperity act to implement various provisions of the budget. The legislative changes to the old age security program are contained in this bill.
It is my hope that by tabling the details of this legislation, we will be able to dispel much of the fearmongering that members opposite have chosen to wilfully bring forward. I note that they seem to be ignoring the realities of our aging population here in Canada.
Even after I and the Minister of Human Resources and Skills Development have risen dozens of times in this place and delivered the same answer, I still feel the need to reiterate that all those currently receiving OAS and GIS benefits will not lose a single cent because of these changes, no matter how often the opposition wants to fearmonger otherwise. People who are close to retirement—that is, people who are age 54 and over as of March 31 of this year—will not be affected by this policy change at all. We are providing Canadians with a lengthy period of notice in order to adjust their retirement savings plans. Sadly, we have witnessed attempts by the opposition to score cheap political points by fearmongering on both these points.
Our government is committed to ensuring the sustainability of the old age security program for future generations. These changes will ensure that the OAS remains strong and that it will be there for our children and grandchildren when they need it.
Before I go further, I will outline that these changes have nothing to do with the Canada pension plan, which is a separate program with a different form of financing. There is no sustainability issue for the CPP. It is fully funded for the next 75 years at current contribution rates. This fact has been confirmed by the Chief Actuary.
However, the same cannot be said for the old age security program. I am aware that our government has already explained why these changes are necessary many times over, but the current motion before the House indicates yet again why there is a need to reiterate these reasons. The opposition just does not seem to understand the reality of an aging population here in Canada.
Life expectancy for Canadians has gone up significantly over the last number of decades, and it is expected to continue rising. It is good news, of course, that Canadians are living longer, healthier lives. They enjoy one of the longest average life expectancies in the world, at around 81 years of age.
I am currently a pediatric orthopedic surgeon. As a medical professional, I am well aware of the many advances Canadians have made in making healthier life choices. However, with the increases in life expectancy, Canadians are collecting retirement benefits for a much longer time than when the OAS was first introduced. This has an impact in the ratio of workers who are paying for the benefits our seniors are collecting.
In 2010, 4.7 million people collected basic old age security. By 2030, the number of people collecting OAS will have nearly doubled to 9.3 million.
To put it bluntly, this means that a small number of working taxpayers will be supporting a larger number of OAS recipients. As a result, the cost of the OAS program is projected to rise dramatically, from approximately $38 billion now to $108 billion in 2030.
As members know, the baby boom generation—that is, people born between 1946 and 1964—is the largest cohort in Canadian history. Canada's wealth and economic productivity expanded enormously when baby boomers brought their values, knowledge, skills and energy into the workforce. They have contributed greatly to the development of our great country, but now, as these men and women are starting to retire in greater numbers, there are fewer and fewer younger workers to replace them.
In 1990 the ratio of working-age Canadians compared to the number of retired Canadians was roughly five to one. Today, the ratio has shrunk to four to one; in 2030, it will be two to one. The visualization and the realization are quite striking. There will be only two working people for each retired individual. This will be the first time that this has happened in the history of our country, and it will have a profound effect on the fiscal balance of our country. The fewer people we have in the workforce, the less productive our country is likely to be and the less tax revenue there will be to pay for government programs.
Canada is not alone in this demographic shift. Population aging is a worldwide phenomenon. According to the United Nations, in 2005 10% of the world's population was 65 years of age or older; by 2025, that proportion is expected to reach about 15%, or slightly more than one person in six.
If we look to our neighbours and counterparts in the industrialized world, we see that many have already started reforming their pension systems to take demographic changes into account. Twenty-two of the 34 OECD countries have recently increased, or announced plans to increase, the public pension age. These include the United Kingdom, Australia, France, Germany, the Netherlands, Italy, Japan, Denmark and many others. These countries are making changes to keep their retirement income system sustainable and ensure the financial security of their older citizens now and in the future. It is time for Canada to follow their example.
The OAS program cannot continue in its present form indefinitely. It is becoming unaffordable and needs to reflect demographic shifts. That is why we are taking action now to give Canadians certainty to plan for the implementation of these changes in the future.
If we had refused to acknowledge these realities and had simply sat back and done nothing, the OAS program would be unsustainable. OAS is the largest single program of the Government of Canada, and it is funded 100% by annual tax revenue. Let me be clear on this point: the benefits that were paid this year to our deserving seniors came exclusively from the taxes that were collected this year. This is why the ratio of workers to retirees is critical to the understanding of why we have to act now to ensure the sustainability of this program. Today we spend 13¢ of every federal tax dollar on old age security; if we do not make changes now, in about 20 years that share will grow to spending 21¢ of every federal tax dollar on this program.
If we do not make these changes to the OAS program, there are only two alternatives for dealing with this cost: raising taxes or diverting funds from other government programs and services. We know that the tax-and-spend coalition across the aisle has no problem raising taxes. Whether it is a job-killing carbon tax or increases to the GST, the opposition has not met a tax it does not like. However, considering the decreased ratio of workers who would have to shoulder the increased costs of government services, raising taxes would critically damage Canadian business competitiveness and the Canadian economy.
As an MP, I represent an Ontario riding, and my constituents know far too well the record of the leader of the Liberal Party and his track record of damaging a fragile and struggling economy by increasing taxes. This is simply not a reasonable solution, and it would cause far too much harm to the Canadian economy. As we have consistently stated in previous campaigns, the Speech from the Throne, and the most recent budget 2012, we remain committed to our low-tax plan for jobs and economic growth.
Diverting funds from other programs and services is obviously not an option. To pay for the increases in OAS, the government would be forced to take funds that are currently being used to support deserving Canadians requiring assistance from the government.
We have seen over-the-top reactions from the opposition benches as the government moves to find efficiencies for our latest rounds of deficit reduction reviews. They simply cannot have it both ways. We are talking about an 8% increase in the total cost of government spending. We are convinced that the only way, and the only just way, to relieve the cost pressures on OAS is to raise the age of eligibility. This would ensure that the OAS will still be there for our children and grandchildren by the time they reach retirement.
The proposed changes will happen with a lengthy notice period and will be phased in over several years. We will gradually raise the age of eligibility from 65 to 67. These changes will not affect people who are currently receiving OAS benefits. They will continue to receive them as they did before.
The operative word here is “gradual”. Nothing is happening overnight. In fact, the transition will only start on April 1, 2023, which is 11 years from now. Once the transition begins, it will take six years to complete. To put it another way, the process will take 17 years, until 2029. This is a longer implementation period than most OECD countries will provide when increasing the eligibility age of their public pensions.
Let me be very clear on this. Everyone will have more than a decade before the changes start to set in, and it will be close to two decades before they are fully implemented. There is ample time for all Canadians to adapt their retirement plans.
Anyone 54 years of age as of March 31, 2012, in other words those born before or on March 31, 1958, will still be entitled to OAS and GIS at age 65.
The ages at which the OAS allowance for low income spouses and the OAS allowance for the survivors are provided remain the same for anyone who is 49 years of age or older as of March 31, 2012. They will continue to be eligible between the ages of 60 and 64.
I know this is reassuring news to older Canadians after all the fearmongering that has happened from our opposition colleagues. I want to reassure Canadians that current seniors' benefits are not being affected.
For younger people, there is plenty of time to prepare for these changes and adapt their retirement plans. Canadians born between April 1, 1958 and January 31, 1962 will be eligible to receive their OAS benefits and the GIS between the ages of 65 and 67, depending on the month in which they were born. The details of the transition will be outlined in the budget and are also reflected in the budget implementation bill which was tabled this morning.
Canadians born on or after February 1, 1962 will be eligible to receive OAS benefits at the age of 67. For the allowances, the range of eligibility will shift from between 60 to 64, gradually increasing to 62 to 66 for people born between April 1, 1963 and January 31, 1967, depending on their birthday. In other words, the age of eligibility will be 62 for the allowance and the allowance for the survivor for people born on or after February 1, 1967.
Certain federal programs that are currently providing income benefits until age 65 will be changed in tandem with the OAS program so that there is no sudden gap in income for recipients 65 and 66 years of age. These programs include those provided by Veterans Affairs Canada and Aboriginal Affairs and Northern Development Canada.
Also, the Government of Canada will compensate provinces and territories for net additional costs they face resulting from the increase in the age of eligibility for OAS. Again, for Canadians who are 54 years of age or over as of March 31, 2012, they will still be eligible for the OAS pension and the GIS at age 65. If they want to stay in the workforce past 65, they will be able to defer their OAS benefit and receive a higher actuarially adjusted pension up to five years later. I will speak to this in a moment.
In addition to gradually increasing the age of eligibility, we are making two other changes to OAS we believe will benefit Canadians. The first is proactive enrolment. Right now all seniors have to formally apply for the old age security and guaranteed income supplement benefits. Between 2013 and 2016, we will begin proactively enrolling Canadians into the OAS program, eliminating the need for seniors to apply. This will reduce the government's administrative burden, but more important, it will ensure that more seniors have access to the benefits they deserve.
We are making changes to the OAS in the near future, changes which I think Canadians will appreciate. We will be providing Canadians the flexibility as to when they will be able to start receiving the OAS pension. Canadians turning 65 on July 1, 2013 will have the option to defer their OAS benefits for up to five years. People who defer receiving their OAS benefits to a later time will subsequently receive a higher actuarially adjusted monthly pension for the rest of their lives.
This change will give people more flexibility and choice when planning for their retirement, especially when they want to continue working past the age of 65.
It is no secret that Canadian seniors are choosing to stay in the workforce longer. This is a great time for the Canadian economy. More than ever, we need to be able to tap into their energy and continue to benefit from the knowledge and skills they acquired over a lifelong period in the economy.
The flexibility of deferring the OAS pension will make it worthwhile for many Canadians to stay on the job. I want to emphasize that pension deferral will be an option, not an obligation. I would also like to point that people who defer their pension will, on average, receive the same total OAS pension over their lifetime as those who do not defer their benefits.
Never in the history of our country have so many people lived such long and fulfilling lives. This is something to celebrate. However, an aging population is also creating new challenges that we have to face realistically.
When the OAS was introduced, Canadians could expect to live only a few years after retirement. Now many can look forward to two or more decades. Over the next 20 years, the number of Canadians over the age of 65 will jump from 4.7 million to 9.3 million. This is a staggering increase in a relatively short period and it comes with a high price tag. The annual cost of OAS will increase, in fact triple, between 2010 and 2030 from $36 billion to $108 billion.
At the same time as our seniors population is rising, the ratio of workers to retirees will be falling. Unlike the Canada pension plan, the OAS is financed entirely from tax revenues from workers paying that year. Currently, one in seven Canadians is over age 65. By 2030, less than 20 years from now, the ratio will change to two to one. Fewer people working means less revenue and higher costs.
We owe a lot to our seniors. They built our country and they deserve security and dignity in retirement. Our government is determined to take on this responsibility in a fair and prudent fashion to ensure that the OAS system remains sustainable. It is the responsibility of the federal government to think of the future and act in the long-term interests of Canadians. Sadly, the opposition has refused to acknowledge the realities of this aging population. Private sector economists, financial institutions and former Bank of Canada governors have confirmed that we must act now to ensure OAS is sustainable in the long term.
Unfortunately, the opposition parties have chosen the low road. Their baseless fearmongering and ignorance of the need for change do not serve the interests of Canadians. We will not follow the opposition's approach of sticking our heads in the sand and pretending we are oblivious to a coming challenge.
I ask all members in the House to consider our duty to our constituents, to our great country and to our current and future retirees, to rise above our partisanship and to reflect on the actions that need to be taken to ensure fiscal sustainability of a cherished social program. As such, I ask all members of this House to reject the opposition motion and support the actions that our government is taking for the long-term sustainability of OAS for future generations of Canadians.