Mr. Speaker, I rise in the House today to promote the reasonable and necessary action our government is taking to ensure a sustainable old age security program. We are making these changes to give Canadians certainty in their retirement planning by ensuring this cherished social program will be there for future generations.
I will be sharing my time today with the hon. member for Calgary Northeast.
To begin, let me answer the question the opposition members still do not seem to understand: why are changes to the OAS program necessary? The answer is quite simple: these changes are being made to ensure the sustainability of the OAS program. If we do nothing, the costs of the OAS program are projected to rise dramatically, from approximately $38 billion now to $108 billion in 2030. How do we know this will happen? Canadians are living longer and healthier lives.
In 1970, life expectancy was 69 years for men and 76 years for women. Today, some 40 years later, it is 79 years for men and 83 years for women. What is more, the oldest members of the baby boomer generation, the largest in history, turned 65 last year. The impact of these boomers' retiring over the next two decades, combined with the increase in life expectancy of Canadians, will result in twice the number of seniors in Canada.
The OAS program is the Government of Canada's single largest program. Financed from general government revenues, OAS provides benefits to most Canadians 65 years of age and over.
The maximum annual OAS pension currently stands at $6,481, and it is adjusted on a quarterly basis, based on increases to the consumer price index. Additional support for low-income seniors is provided through the guaranteed income supplement, or GIS, which has a maximum annual benefit of $8,788 for single seniors and $11,654 for senior couples. Low-income spouses or common-law partners of GIS recipients and low-income survivors may also receive support through the allowance and the allowance for the survivor programs.
To provide some idea of the program's scope, 4.9 million individuals are currently receiving benefits. This will double to over nine million by 2030.
Let us look beyond the program's vital statistics to examine its past and where it is going.
The old age security program was established at a time when Canadians were not living the long, healthy lives they are now living. Projections show that the cost of the program will grow from $36 billion in 2010 to $108 billion in 2030. That same period will see the number of working-age Canadians per senior fall from 4:1 today to 2:1 in 2030. This compares to the 1990 ratio of five working-age Canadians per senior. That is quite a shift.
OAS is the largest single program of the Government of Canada, and it is funded 100% by annual tax revenues. Let me clear on this point. The benefits that were paid out 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 understanding why we must act now to ensure the sustainability of this program.
Today we spend 13¢ of every federal tax dollar on the old age security program. If we do not make changes now, in about 20 years that share will grow to 21¢ on every federal tax dollar spent. That is exactly why the changes announced in budget 2012 are necessary: to ensure that the OAS program remains on a sustainable path. These modifications will ensure that the OAS program remains strong and is there for future generations, as it is for seniors who currently receive these benefits.
What will this mean for Canadians? First and foremost there will be no reductions to seniors who are already collecting OAS benefits. These changes will not begin for another 11 years. Starting on April 1, 2023, the age of eligibility for OAS and GIS will gradually increase from 65 to 67, with full implementation by January 2029. Anyone who is 54 years of age or older as of March 31, 2012, will not be affected.
In line with the increase in age for OAS and GIS eligibility, the ages at which the allowance and allowance for survivors are provided will also gradually increase from 60 to 64 today, to 62 to 66 starting in April 2023. Regarding the allowance and the allowance for survivors, anyone who is 49 years of age or older as of March 31, 2012 will not be affected.
Let me stress again that this will occur in 2023, 11 years from now. The 11-year advance notification and the subsequent 6-year phase-in period will allow more than ample time for those affected by these changes to make the necessary adjustments to their retirement plans.
The government will ensure that certain federal programs which are currently providing income support benefits until 65 are aligned with the changes to the OAS program. We are taking this step to make sure that individuals receiving benefits from these programs do not face a gap in income at the ages of 65 and 66.
We are also examining the impact of the OAS program changes on CPP disability and survivor benefits.
We have also committed to reimbursing the provinces for the net cost of raising the OAS eligibility so that there will be no additional cost borne by the provinces. This is in stark contrast to the previous Liberal government, which changed many programs and left the provinces to pick up the tab.
I would like to take a moment to focus on some of the great OAS program modifications announced in budget 2012 which have received far less attention so far.
To improve flexibility and choice in the OAS program for those wishing to work until later in life, the government will allow for the voluntary deferral of the OAS pension for up to five years starting on July 1, 2013.
We should think about the people I spoke of earlier, those who are enjoying longer, healthier lives and who may be considering extending their careers. This is a trend we are already seeing when it comes to the average age of retirement. This measure will give these individuals the option of deferring their OAS pension to a later time, and as a result, they will receive a higher monthly amount. However, I should add that GIS benefits which provide additional support to the lowest income seniors will not be adjusted.
The details of these actions are spelled out in the jobs, growth and long-term prosperity bill which was introduced this morning and will implement various provisions of the budget.
Our government will also be improving services for seniors by putting in place a proactive enrolment effort that will eliminate the need for many seniors to apply for their OAS benefits. This measure will reduce the burden on many seniors of completing applications for benefits for which the government knows they have qualified.
As an added bonus, this automatic process will reduce the government's administrative costs, which I would observe is what sets our deficit reduction strategy apart from our predecessor's in that we are improving services to Canadians while reducing the cost of administration. Proactive enrolment will begin next year and will be fully implemented by 2016.
In summary, it is the responsibility of the federal government to think of the future and to act in the long-term interests of all Canadians. Sadly, the opposition has refused to acknowledge the realities of our aging population in order to play political games.
Private sector economists, financial institutions and former Bank of Canada governors have confirmed that we must act now to make the OAS program sustainable. That is exactly why I cannot support the opposition's motion.