Federal government should reject Bloc plan—and raise OAS age of eligibility

Recently, the House of Commons passed a private member’s bill by the Bloc Quebecois to increase Old Age Security (OAS) payments for younger seniors (aged 65-74) by 10 per cent. OAS provides cash benefits for most seniors in Canada, except seniors with very high incomes.

The bill, however, requires the support of Trudeau’s cabinet, which has so far refused to grant a "royal recommendation" that would allow the bill to become law. And that’s the right call. In fact, the government should go further and raise the age of eligibility for OAS.

Here's why.

Governments should always be cautious with taxpayer money and strive to direct financial assistance to those actually in need. It’s hard to think of a worse strategy to achieve this goal than increasing OAS benefits for seniors who are a relatively high-income demographic. In fact, the share of seniors living in “low-income” is only about half of that for the working-age population. It may be a good idea to increase targeted assistance for the small number of seniors that struggle financially, but spraying almost the entire demographic with a firehose of scarce taxpayer funds is difficult to justify on equity grounds.

The idea also flies in the face of the Trudeau government’s promise in its last budget to work for “generational fairness” and help make the economy work better for younger Canadians who face a housing crisis and low youth employment rates among other economic challenges.

Why? Because any increase to OAS benefits would be deficit-financed (that is, the government would need to borrow the money) and the cost would fall on the shoulders of working-age Canadians who must pay the interest on the resulting debt. In other words, boosting the OAS would be a massive income transfer from younger Canadians to older Canadians.

Again, instead of boosting benefits for younger seniors—like the Bloc has proposed, with support from Conservatives and the NDP—the federal government should go in exactly the opposite direction and increase the age of eligibility for OAS.

Simply put, people are living longer than when the program was first designed. And not just here at home but around the world, which is why there’s a clear international trend in increasing the age of eligibility for old-age benefit programs. According to our analysis in 2022, among 22 high-income OECD countries, 16 had either already increased the age of eligibility for public retirement programs above the age of 65 or were in the process of doing so. Several countries have also indexed the age of eligibility to life expectancy, to help prevent costs from spiralling out of control.

Canada was once on track to participate in this sensible international trend when the Harper government announced a plan to raise the OAS eligibility age from 65 to 67 (while giving ample lead time before the change to not disrupt the financial planning of Canadians nearing retirement). The Trudeau government reversed this decision (at great financial cost) in 2016 almost immediately after taking office. But now, the government would be well-advised to revisit the plan and raise the age of eligibility to 67, for the same reasons it’s reluctant to approve the Bloc’s motion and increase payments to younger seniors.

Ensuring income security for older Canadians is an important policy goal. But it’s equally important to achieving this goal in a way that does not unfairly burden working-age Canadians and directs money where it’s needed most.