Retirement income changes won't be sudden, government says
Canada Pension Plan well-funded but other programs are not
Any changes to retirement income won't be sudden, but the government isn't ruling out any options for restructuring the system, Minister of State for Finance Ted Menzies said Friday.
In an interview with Rosemary Barton on the CBC News Network, Menzies says the government wants to make sure the system in place now can be sustained in the future.
"I don't think we'd change anything overnight," he said.
"We're looking at all options right now. We're looking at all options that make it sustainable."
Prime Minister Stephen Harper told world leaders Thursday that Canada's retirement income system will see some "necessary" changes in the coming months.
While his keynote speech at the World Economic Forum in Davos, Switzerland on Thursday was short on details, Harper said Canada's aging population "poses a threat" to the country's social programs and services.
"We have already taken steps to limit the growth of our health-care spending … We must do the same for our retirement income system," Harper said Thursday.
Officials said details on some of the initiatives will come in the spring budget.
In his speech, Harper said the Canada Pension Plan, the "centrepiece of that system," was fully funded and would not be changed.
However, he added, "For those elements of the system that are not funded, we will make the changes necessary to ensure sustainability for the next generation."
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Menzies said the retirement income funds were never intended to be a full retirement package, and that the government is providing other tools to save for life after working.
"Canadians have always been expected to contribute to their own retirement as well," he said.
The number of Canadians over 65 will rise to 9.3 million in 2030 from 4.7 million in 2010. Officials noted the cost of OAS benefits is pegged to almost triple to $108 billion a year in 2030 from $36.5 billion in 2010.
OAS is a cornerstone of the retirement security system and, together with the Guaranteed Income Supplement, has been the main reason poverty among seniors in Canada is so low. But since the population is aging and the number of taxpayers is dwindling, the program is seen as unsustainable in its current form.
Numbers provided by Harper's office say there were four taxpayers for every senior in 2010, but by 2030 it will drop to two taxpayers for every senior.
More room for deficit fighting or new programs
A recent report by parliamentary budget officer Kevin Page found the government's decision to limit increases to provincial health transfers meant it could balance the budget faster.
In an email Friday to CBC's Julie Van Dusen, Page said the hints at "more significant program spending restraint" suggest the government is serious about eliminating its structural deficit.
"This does raise the question of whether all this austerity will go to deficit and debt reduction, or is the government creating additional fiscal room for new programs or tax changes?" Page said.
"At this point, we lack the details on policy direction and the government's own analysis of its medium- and long-term fiscal challenges."
Clement says no cuts to OAS
However, Treasury Board president Tony Clement, the minister in charge of finding $4 billion to $8 billion in cuts expected in the next budget, said Thursday Old Age Security isn't going to be cut.
"There are about $200 billion in the federal budget that [relate] to transfers to individuals for things like Old Age Security or EI, or transfers to provinces. Those are all ring-fenced. We're not looking at those," Clement said in Toronto, seeming to contradict the prime minister.
An internal memo from the Prime Minister's Office to supporters says the government will make sure seniors keep getting all the benefits they get now.
"To be clear: there will be no changes to the benefits seniors currently receive," said the memo, obtained by CBC News.
"We will ensure any changes are done with substantial notice and adjustment period and in a way that does not affect current retirees or those close to retirement, and gives others plenty of time to adjust and plan for their retirement."
At his speech in Europe, Harper listed a number of major changes the Canadian government wants to make. Besides OAS, he also mentioned tackling a lack of innovation and science and technology, and using immigration policy to bulk up the labour force, but didn't provide any specific changes.
In an interview with CBC chief correspondent Peter Mansbridge on Jan. 16, Harper said the government would look at public sector pensions and MP pensions as it heads into a period of austerity and deficit fighting. Critics say the public sector pensions are more generous than those private sector workers get, and MPs get a guaranteed interest rate funded by taxpayers rather than out of market investments.
On Monday, when the House of Commons returns, MPs will debate a bill on pooled registered pension plans, a voluntary defined contribution program relying on the stock market for returns. The bill, introduced by Finance Minister Jim Flaherty, will be at second reading stage in the House and still has to be debated there and in committee.
The government has been contemplating changes to the retirement security system for years. One option could be to raise the age at which people can claim benefits.
NDP finance critic Peter Julian said it would be "completely unacceptable" to ask Canadians to work until 67 rather than 65 before qualifying for OAS — a change that remains purely speculative at this point.
"The ominous words, because we don't have any details yet, I think are a slap in the face to Canadian seniors," Julian said at a news conference in Ottawa on Thursday.
The government might also try to shift some OAS recipients to the self-financing CPP system by creating new options for them.
CBC News Network business commentator Kevin O'Leary said any discussion of pension reform is cause for concern.
"When you talk about pension reform, not only in Canada but anywhere on the globe … it means you're not going to get your money. That's the code for what it is. It's simply the system is broken."
With interest rates effectively at zero, the people who manage pension funds have no way to make income without taking inordinate risks, O'Leary said.
"This is a fundamental issue … for elderly people who were not anticipating this. We always had this philosophy in Canada that, don't worry, the government will take care of you … those days are over."
With files from the Canadian Press