Unlike the Canada Pension
Plan (CPP), which is funded by contributions from employees and employers, the
Old Age Security system (OAS) derives its funding by revenue from government.
OAS is by far the largest federal government’s largest senior
benefit programme. OAS Spending accounts for 3.2% of the GDP. The following is based on the Canada’s chief actuary's latest report:
5.8 million: Number of
OAS recipients in 2007
9.3 million: Number of
OAS recipients in 2030
$52.2 billion:
Projected OAS spending this year
$104.3 billion:
Projected OAS security spending in 2030
15 million: Number of
senior citizens in 2030 (almost 35% of Canada’s population)
3.2%: OAS spending as
a percentage of the overall economy in 2030.
21: Average number of
years a senior today will receive old age security benefits
The most significant piece of statistic is
that one-third of Canada’s population will be aged 65 and above by 2030, which
is similar to most developed countries. The key question is whether or not this
is sustainable. Assuming only one half the other population is currently
working (or one-third), there will be a huge burden on supporting the aged for
at least 21 years (from age 65 to 86 based on the statistics above).
The other key aspect apart from the OAS spending
is spending on health care and nursing homes , which have also increased significantly.
The tax burden is going to ultimately fall to the working segment of the
population.
Unless the issues are addressed now, we may
face a much leaner OAS programme in the future, or it may cease to exist. To be
honest, most senior citizens are generally healthy, mentally capable and are
willing to lend a helping hand. We should borrow a page from Japan, where the ‘younger’
elderlies are expected to continue working in various capacities mostly caring
for the even older generation in exchange for ‘retirement credits.’ In return,
when they are older, they will be taken care of, This will also reduce the need for costly
nursing homes.
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