Da Legal Stuff...

All commentaries published on Web Talk are the opinions of the contributor(s) only and do not necessarily represent the position of any other individuals, groups or organizations.

Now, with that out of the way...Let's Web Talk.

Tuesday, January 31, 2012

OAS Changes will Cause Aboriginals & Poor to Die Sooner

Part 3 in a series on potential Old Age Security (OAS) changes.

That's right increasing the age of eligibility for Old Age Security will disproportionatly affect the poorest Canadians and those of Aboriginal descent, in fact it may even cause them to die years earlier than they would otherwise.

Who will suffer the most the age of eligibility for Old Age Security is raised from 65 to 67 or even higher? That’s the question I’ll try to shed some light on today.

Of course anyone already receiving OAS won’t be affected. If you believe the governing Conservatives, those close to 65 (nobody knows how close) won’t be either, but beyond that everyone who expects to makes less than a 100+ thousand a year after retirement will assuredly be affected.

With the state of company sponsored pensions and RRSPs, the high debt levels in Canada and the level of unemployment in various parts of the Country are any indication that’s likely to mean a very large portion of Canada’s population will be in serious trouble as they age.

For some it may mean having to work an additional 2 years (or whatever the number turns out to be).

Working longer may be an inconvenience for those in good health with white collar occupations but it might be a major problem for blue collar workers in physically demanding jobs. I sure wouldn’t want to be climbing around a construction site or loading tractor trailers late into my sixties, especially if my joints were already fighting back from years of abuse.

Even those lucky enough to have company pensions may feel the heat. What would happen if (as an example) it was decided to raise the age of qualification for anyone more than 5 out, in other words anyone under 60. What would happen to someone who retired already, say at 55 with a small company pension and enough savings to supplement their income until 65 when they expected to collect OAS?

Most company pension plans are designed to be clawed back by a substantial amount once a retiree reaches 65. If that happens what would an existing retiree do for income when his company pension is reduced and he or she still doesn’t qualify for OAS?

For some things might get pretty rough. It could mean less money after retirement to cover the cost of luxuries such as groceries, rent medications or heat. That’s bad enough but it could be worse…

What if the changes made you die sooner than you would have otherwise? Think it can’t happen, think again.

Many individuals can make arguments for leaving the age as it is but beyond the standard concerns across Canada there are two groups who could be hit pretty hard by a rise in the age of qualification.

The poor and Aboriginals

The Harper government claims that because people live longer today than they did in the 1960’s, when the qualification age was set at 65, something has to be done to offset this extended lifespan.

The average Canadian is indeed enjoying a longer life today but what he neglects to say is that the poorest Canadians and those of Aboriginal descent tend to die much younger than the average. This means that a rise in the age of eligibility will disproportionately penalize those groups by taking more money from their pockets than from anyone else. So much for Canadian equality.

Monday, January 30, 2012

Old Age Security - By the Numbers

Part 2 of a series of commentaries on proposed chnages to the Canadian Old Age Security program.

OAS Changes – By the Numbers

If Ottawa increases age of eligibility for Old Age Security (OAS) from 65 to 67, forcing a large part of the population to continue working further into their so called “golden years” what will the impact be?

In an effort to understand the potential impacts lets assume the Harper government will, as stated, leave current OAS recipients alone and have no plans to change the rules for anyone close to retirement. The actual age range that would be affected is as yet unknown but for the purposes of this evaluation let’s assume those within 5 years of eligibility (those already 60 or over) won’t be impacted.

Canada has an estimated population of 34.5 million citizens. Currently 27.5 million are under the age of 60 and would be directly impacted. Due to the low number of people with adequate company pension programs in Canada it’s a fair assumption that a large portion of these people would have to find other means of support when they retire, or they would have to ontinue working longer in order to receive less OAS from age 67 onward. (Lower benefits naturally result from collecting from a shorter period of time between enrolment and death).

The 27.5 million affected represent 80% of Canada’s population.

There’s more.

The reason Ottawa says it needs to make these changes is the large number of baby boomers about to retire (driving up the cost of the program) making it unsustainable. With that in mind one has to consider the long term outlook, not just the next decade or two.

Based on Canada’s age demographics the increased cost of baby boomer retirements will peak around 2031 and then begin to taper off as less boomers enter the program and more begin to pass away and are no longer in the system. After that point the cost of OAS will begin to drop off and eventually end up at an even lower cost (as a % of GDP) than it is today.

Approximately 30% of Canadians are between 45 and 59 and these individuals would be the most severely impacted. Many of these people are already in their “best earning years” and many will find it difficult to find ways of growing any soft of alternate retirement funds over the limited amount of time remaining before retirement. As a result they will have to make some tough decisions, either delaying retirement or looking for ways to offset those missing two years over a relatively short period, if they can even afford to invest any of their income in a volatile market.

Those who are unemployed or on social programs will also be in peril as they’ll continue to be dependent on provincial social programs for the intervening years.

Consider as well that a full 50% of today’s population, or more than 17 million Canadians, are currently under the age of 45. This means that even though they have more time to prepare for their future they will be affected regardless. These Canadians may have more time to prepare but is it really necessary to make these people the first generation to be forced into coping with less than the generation before them?

Even under the existing rules that allow for retirement at 65, anyone under 45 would not be eligible for OAS until at least 2032 or in most cases, many years later. This means that long after the increased cost of the baby boomer bulge has passed and when costs are dropping off these Canadians will still be forced to work longer for less pension dollars.

While the numbers touted by Conservative pundits may seem staggering, with costs growing from 36 Billion to 108 Billion by 2031, those numbers don’t tell the entire story.

Over the same period projections also show Canada’s GDP increasing at a healthy rate right along with the cost of OAS. The more accurate measurement to consider is the cost as a percent of Canada’s GDP. This measurement shows us that even at the height of the “bulge” (2031) the overall cost of the program is only expected reach 3.14% of GDP, a very sustainable number. Currently the cost sits at 2.41%. That’s a total increase of less than 1% of GDP (0.73% to be precise) after which the costs start to decrease at an ever increasing rate, eventually ending up even lower than the current level

The current government claims we only have to look to Greece or other European nations to see what happens when pension plans grow out of control. Never mind that the problems in some EU countries are the result of many complex issues that extend beyond public pensions, that’s the line they have decided to push.

When you consider that even 5 years ago France’s public pension plan cost about 10% of GDP, the UK 6.6%, Germany 10.4% and the EU at about 10%. Those numbers are hardly comparable to 3.14% 20 years from now. In fact the numbers show that rather than being a crisis, Canada’s temporary bubble in OAS cost is actually little more than a minor inconvenience.

In the end the numbers tell us that by increasing the age requirement in order to address a short term “bulge” Ottawa stands to benefit greatly from reduced program costs in later years while still forcing aging workers to remain in the workforce longer.

The benefits to Ottawa identified above don’t even include the added tax revenue generated from the quasi-enslaved workers, or additional impacts to workers such as the added tax burden they’ll face on a provincial level as the provinces are forced to extend existing social services program payments for low income individual past the age of 65 and until they are eligible for OAS at 67.

Sunday, January 29, 2012

Ottaw is About to Pick Your Pockets - Again

If you saw a hard working older person being robbed of something they’d worked their entire lives for would you help them? Would you do the right thing or would you simply look the other way?

Would we even stand up for ourselves if we were the ones about to be robbed?

Thanks to the federal government we may soon be given an opportunity to find out.

Ottawa’s plan to move forward with changes to the Old Age Security system (OAS) in the upcoming budget will take money directly out of your pocket in the coming years and the pockets of Canada’s most vulnerable, its seniors.

At present Mr. Harper’s is focused on picking the pockets of those who look forward to collecting OAS at 65 but aren’t quite there yet. He says his plans won’t affect those already collecting OAS but once politicians and bureaucrats begin their tinkering it’s a slippery slope. Who knows where the changes will ultimately end.

For now the target is the average person in their 30’s, 40’s or 50’s, the hard working middle class. They’ll be the ones left to pay now and pay later.

If you’ve worked your entire life and hope to collect OAS at 65, you better think again.

The same people whose tax dollars currently pay for the program those over 65 enjoy are about to be told they’ll have to wait longer, perhaps to 67 or older before being eligible.

While your taxes have been paying for this federally funded plan since the first day you started working, if the Harper government has its way you can plan on toiling away to continue paying for it well out into your so called golden years.

So why is the Harper hell bent on messing with the Old Age Pension?

He says it’s because the crush of Baby Boomers about to retire will drive up the cost making it unsustainable. That’s a lie. In fact the real motive behind this robbery is to keep the working class slaving away even longer in order to prop up a declining workforce and continue paying taxes for a few more years.

The federal finance minister is quick to toss out big numbers as a way of proving the program is unsustainable. As impressive as those numbers appear they’re nothing but smoke and mirrors.

The truth is that 20 years out those same Baby Boomers blamed for putting too much strain on the system will begin to pass away and the cost of providing the OAS will once again naturally slide back to more normal levels.

Even with the “boom” about to happen the cost is projected to be just over 3% of GDP, a sustainable amount considering the rate of fiscal growth in Canada each year. Naturally it isn’t the sort of increase a government would want to manage for too long but as the number of surviving Baby Boomers naturally declines after so will the costs.

There’s a reason the working class are called “wage slaves” and this is it.

Not only will you have Mr. Harper to thank for working longer in order to pay for a system you won’t be able to access until much later in life but as an added bonus you’ll also get to pay more to cover the gap it will create on the provincial level.

Currently provincial governments cease to pay social assistance to low income recipients once they begin collecting Old Age Security at 65. Raising the age of qualification means provincial assistance programs will have to be extended to fill the void, and guess who’ll have to pay for this added tax burden being downloaded to the provinces?

When you add it up, raising the age of qualification for OAS means:

A) Canadians will be forced to work longer before they can retire;

B) Will continue to pay more federal taxes over the extended period in order to support those already on OAS;

C) Will be forced to pay even higher provincial taxes necessary to extend social programs needed to fill the void left by the changes; and

D) In the end will collect less OAS by virtue of receiving it later in life than they would have otherwise.

If that isn’t like someone stealing money out of your pocket I don’t know what is.

If you hope to collect Old Age Security at 65, if you’re a hard working person who doesn’t have a company pension or your pension won’t be enough to retire on, if you are in a physically demanding job and worry that you may not be able to physically continue working past 65, now is the time to stand up and do something for yourself and those around you.

Call, write or email your Member of Parliament. Let them know how you feel about being fleeced. Contact the Prime Minister directly. Send a message to the Conservative Party of Canada letting them know that you won’t stand for it and they’ll pay the price in the next election.

If someone was about to be robbed, would you try to stop it? Somebody is and it’s you.

Note:  If you aren't sure how to contact your Member of Parliament check out the links section on the left side of this page for a site that will allow you to look up their contact information.