moved:
That this House reject the government’s plan to raise the age of eligibility for Old Age Security and the Guaranteed Income Supplement from 65 to 67 years even though the current system is financially sustainable.
Madam Speaker, I am pleased to introduce this motion, which reaffirms our dedication to seniors and the viability of old age security in Canada. This motion highlights that the system is sustainable if we maintain the eligibility for OAS at age 65.
I am also pleased to be splitting my time with the member for Pierrefonds—Dollard.
The motion is about government priorities or, more accurately, the lack of intelligent practical priorities that benefit Canadians. Investing in seniors, investing in our economy and ensuring they have security is essential because seniors spend all of their money in their community. They shop at home and create jobs in local businesses.
I also want to talk a bit about the impact of the government's decision to increase the age of retirement to 67 on young people who are working today.
Raising the age of the OAS-GIS penalizes younger Canadians. The Conservatives claim that their changes are necessary to ensure that the pension system is viable for future generations. However, the Parliamentary Budget Officer, the OECD and numerous other pension experts dispute this claim.
This change proposed by the government will hurt younger Canadians more than the baby boomers of today. These young Canadians are already facing record levels of unemployment, which tends to reduce income levels later in life. There is an extremely high level of student debt among these young people and housing costs are eating up more and more of their earnings.
The government's decision will make life for young Canadians even more difficult. It will affect the poor the most. Those who can least afford to choose will be impacted negatively. Above all, senior women will be disproportionately affected.
I have been meeting with seniors across the country, as has my partner in the seniors pensions portfolio. Yesterday, I was in Truro, Nova Scotia where I talked to seniors who told me that investing in seniors should be a priority.
Canadians have taken great pride in the social safety net that we have in this country. Beginning in 1927, J.S. Woodsworth convinced the minority government of Mackenzie King to create the old age pension, which, in about 1952, became the OAS. Since that time, we have seen all kinds of changes, with the addition in 1967 of the GIS, all to help alleviate seniors' poverty.
The OAS is universally available to all retirees who have lived in Canada for 10 years or more and full pensions for those who have been here for 40 years after age 18 with pro-rated scales for those who have been here for less than that time. It is the first of three government supported retirement income systems, the second being CPP-QPP based on workplace earnings and the third being private savings like workplace pensions, RRSPs and RRIFs. For singles, the maximum OAS monthly payment is $540.12. The average is about $508. The maximum GIS is $732 with the average being $491. That makes a total income for a single person of $15,270. The low income cut-off in Canada is $18,373.
It is interesting and quite disturbing that when it became clear about 35 years ago that there would be lots of baby boomers, the government's response was that we must have RRSPs. In the interim, we have discovered that RRSPs are expensive in terms of government revenues. It costs about $18 billion to supplement RRSPs.
The tragedy is that RRSPs are not a good savings vehicle. About 40% of their value was lost through management fees over a 45-year period. If it is necessary to cash them in, such as if someone needs a new roof or the furnace breaks down, there is a huge penalty. Fewer than 30% of Canadians are able to find enough money at the end of the month to even consider RRSPs. Therefore, as a savings vehicle, they are not very good.
The next concern about pensions probably heated up with the Nortel employees. Many of those employees lost 40% of their pension benefits. I need to underline that pensions are deferred wages and they belong to the employees. Nortel declared bankruptcy and then sold off a great deal of intellectual property that was worth millions and billions. The governments in the U.K. and in the United States protected their Nortel workers' pensions. Canada did not. The Conservative government chose not to. It could have because the NDP had a bill before the House, workers first, that would have protected holiday pay, severance pay and pensions. The government could have acted and chose not to.
Because of the Nortel meltdown and the crisis that so many workers faced, people became aware that only 30% of Canadians have private pensions and many are dependent on CPP, OAS and GIS. In many cases, it is simply not enough for people to manage, particularly single women. The call for reform was out there, and justifiably so. The federal government agreed to meet with the provinces, and nine of them wanted pension reform. Alberta balked, and the federal government then said that it would bring in pooled registered pensions plans.
I will tell everyone about pooled registered pension plans. First, the employer may or may not set up a PRPP and the employer determines the level of contributions, although the employer may choose not to contribute. If employees want out, they need to give 60 days' written notice. The problem with these so-called pension plans is that they are not indexed. They are defined contributions without any set or determined pension benefit. They are gambled on the stock market. They are not reliable and have very high management fees. It is just another crapshoot, which is simply not acceptable. Nothing in the PRPP proposal sets management expenses at levels equal to or lower than those of the Canada pension plan. As a result, CPP is still a much better deal.
What is needed is real reform, and six provinces are still interested in talking. I will begin with CPP, which is the best way to save for retirement. It covers 93% of Canadian employed workers, essentially the entire labour force, and it is portable from job to job across the provinces. It keeps up with the cost of living and is exclusively financed by workers and their employers. It is absolutely independent of any cost to government. It is safe, secure, indexed against inflation and, as I mentioned, there are very low management fees. In terms of CPP reform, a modest increase in CPP contributions, as Bernard Dussault, the former chief actuary for Canada pension, said, is absolutely doable. Therefore, we can do that.
We can also take a very close look at OAS. We know that the Parliamentary Budget Officer has been very clear in saying that we can afford OAS now and in the future. Right now it is about 2.3% of gross domestic product. In 2030 it will climb to 3.3% and then it will go down significantly. To pretend that we cannot afford it is simply abusing the numbers.
I hope the House will support this motion. It is absolutely essential. If we respect our seniors, we will make sure their pension and their retirement is secure.
