Actuarial Report (13th) supplementing the Actuarial Report on the Old Age Security Program as at 31 December 2012

Document Properties

  • Type of Publication: Actuarial Report
  • Date: 15 July 2016

The Honourable Jean-Yves Duclos, P.C., M.P.
Minister of Families, Children and Social Development
House of Commons
Ottawa, Canada
K1A 0G5

Dear Minister:

In accordance with section 4 of the Public Pensions Reporting Act, which provides that an actuarial report shall be prepared by the Chief Actuary when an amendment to the Old Age Security Act that affects the cost of benefits is introduced in the House of Commons, I am pleased to submit the 13th Actuarial Report on the Old Age Security program.

Yours sincerely,

Signature of Jean-Claude Ménard

Jean-Claude Ménard, F.S.A., F.C.I.A.
Chief Actuary

I. Executive Summary

This is the 13th Actuarial Report since the inception of the Old Age Security Act in 1952. It has been prepared in compliance with section 4 of the Public Pensions Reporting Act, which provides that:

“…Where an amendment is made to a pension plan referred to in subsection 3(1) and the amendment affects the cost of benefits or creates an initial unfunded liability, the Minister shall cause the Chief Actuary to conduct an actuarial review of the plan as of the effective date of the amendment.”

The most recent report made pursuant to section 3 of the Public Pensions Reporting Act is the 12th Actuarial Report on the Old Age Security (OAS) Program as at 31 December 2012, which was tabled in the House of Commons on 20 August 2014. Therefore, this 13th Actuarial Report has been prepared on the basis of the 12th Actuarial Report to show the effect of Division 9 of Part 4 of Bill C-15 on the long-term financial status of the OAS program.

Division 9 of Part 4 of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, received Royal Assent on 22 June 2016. Starting 1st of July 2016, it amends the Old Age Security Act to increase the single rate of the Guaranteed Income Supplement (GIS) top-up for the lowest income pensioners by up to $947 annually.

For the lowest-income individuals who receive the GIS top-up for single seniors, seniors whose spouse is not a pensioner, and persons receiving the Allowance for the Survivor, this amendment more than doubles the maximum GIS top-up and represents a 10 percent increase in the total maximum GIS benefit available to the lowest-income single seniors.Footnote 1 The increased top-up will be reduced by 25 cents for every dollar of income in excess of $2,000 for single individuals and therefore, no top-up is payable for single individuals after the annual income reaches about $8,400, or combined annual income of $16,800 for a couple in the case where the spouse is not a pensioner. The increased top-up will be indexed in line with increases in the Consumer Price Index (CPI).

Division 9 of Part 4 of Bill C-15 also repeals section 2.2 of the Old Age Security Act, which increases the ages of eligibility for the OAS basic pension and the GIS benefit from 65 to 67 and Allowance benefits from 60 to 62 over the 2023 to 2029 period.

Main Findings

This 13th OAS Program Actuarial Report shows the following:

Increasing the GIS Top-Up Benefit

  • The increase in GIS and Allowance expenditures is projected to be $315 million in 2016 and $775 million by 2020. GIS and Allowance expenditures are thus projected to be $3.2 billion higher than under the 12th OAS Program Actuarial Report over the period 2016 through 2020.
  • The projected number of GIS and Allowance beneficiaries who will receive the full or a partial additional top-up benefit is estimated to grow from 813,000 in 2016 to 925,000 by 2020.
  • By 2030, GIS and Allowance expenditures are projected to be $1.2 billion or 0.03% of the GDP higher than projected under the 12th OAS Program Actuarial Report.

Cancelling the Increase in Ages of Eligibility

  • By 2030, cancelling the increase in the ages of eligibility for OAS benefits is projected to increase the number of beneficiaries of the OAS basic pension by 1 million and increase the number of GIS and Allowance beneficiaries by 187,000.
  • By 2030, cancelling the increase in the ages of eligibility is projected to increase total program expenditures by $10.4 billion. This represents an increase of 0.3% of GDP.

All Amendments

  • Taken together, the amendments are projected to increase total program expenditures by $11.6 billion by 2030, which represents an increase of 0.33% of GDP.

II. Introduction

This report has been prepared in compliance with section 4 of the Public Pensions Reporting Act, which provides that:

“…Where an amendment is made to a pension plan referred to in subsection 3(1) and the amendment affects the cost of benefits or creates an initial unfunded liability, the Minister shall cause the Chief Actuary to conduct an actuarial review of the plan as of the effective date of the amendment.”

The most recent report made pursuant to section 3 of the Public Pensions Reporting Act is the 12th Actuarial Report on the Old Age Security (OAS) Program as at 31 December 2012, which was tabled in the House of Commons on 20 August 2014. Therefore, this 13th Actuarial Report has been prepared on the basis of the 12th Actuarial Report to show the effect of Division 9 of Part 4 of Bill C-15 on the long-term financial status of the OAS program.

III. Description of Division 9 of Part 4 of Bill C-15

Division 9 of Part 4 of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, received Royal Assent on 22 June 2016. Starting 1st of July 2016, it amends the Old Age Security Act to increase the single rate of the GIS top-up for the lowest income pensioners by up to $947 annually.

For the lowest-income individuals who receive the GIS top-up for single seniors, seniors whose spouse is not a pensioner, and persons receiving the Allowance for the Survivor, this amendment more than doubles the maximum GIS top-up and represents a 10 percent increase in the total maximum GIS benefits available to the lowest-income single seniors.Footnote 2 The increased top-up will be reduced by 25 cents for every dollar of income in excess of $2,000 for single individuals and therefore, no top-up is payable for single individuals after the annual income reaches about $8,400, or combined annual income of $16,800 for a couple in the case where the spouse is not a pensioner. The increased top-up will be indexed in line with increases in the Consumer Price Index (CPI).

Division 9 of Part 4 of Bill C-15 also repeals section 2.2 of the Old Age Security Act, which increases the ages of eligibility for the OAS basic pension and the GIS benefit from 65 to 67 and Allowance benefits from 60 to 62 over the 2023 to 2029 period.

IV. Financial Status

Unless stated otherwise, the financial estimates presented in this report use the same actuarial assumptions and methods as per the 12th OAS Actuarial Program Report as at 31 December 2012.

The financial estimates in this report are presented in three sequential steps. First, the impact of increasing the top-up for the single rate GIS and Allowance for the Survivor benefits, effective 1 July 2016, is presented. These estimates are shown relative to the best-estimate projections of the 12th OAS Program Actuarial Report. Next, the impact of cancelling the increase in the ages of eligibility for OAS benefits between 2023 and 2029 is presented relative to the increase in the top-up. Finally, the total impact of the amendments is presented relative to the 12th OAS Program Actuarial Report.

1. Impact of Increasing the GIS and Allowance Top-Up

A. Assumptions and Methods

The increase in the top-up benefit in conjunction with keeping the reduction rate at 25% on income above $2,000 results in an increase in the upper income limit where the top-up benefit ceases to be payable. For example, in the case of the GIS benefit for single seniors, the income limit to receive the top-up increases from about $4,600 to $8,400 (see Chart 1). As such, for the purpose of this report, GIS for single seniors, GIS for seniors whose spouse is not a pensioner, and Allowance for the Survivor beneficiaries already projected to receive the current top-up (full or partial) are assumed to all receive the maximum additional top-up of $947 per year.

Chart 1 - New Income Limits for Top-Up Benefit (GIS for Single Seniors) – 2016
Chart 1

The overall number of seniors eligible to receive the GIS single rate benefits and Allowance for the Survivor benefit is not projected to change because of the increased top-up. However, the number of such beneficiaries eligible to the top-up is assumed to increase as a result of the increase in the income limit to receive the top-up.

Using our July 2015 OAS beneficiaries database, we have developed assumptions on the proportions of beneficiaries by age, sex and type of benefit who currently do not receive a top-up benefit but who would now become entitled to receive at least a portion of the additional top-up benefit (see Chart 1). The projected average additional partial top-up benefits were also determined for these individuals. Table 1 shows the assumed proportions of male and female beneficiaries becoming entitled to a partial top-up benefit and the average top-up benefit expressed as a percentage of the maximum additional top-up benefit.

Table 1 - GIS and Allowance Beneficiaries Becoming Entitled to a Partial Top-Up Benefit
MALES
Benefit Age
65 70 75 80 85 90+ All
GIS Single Proportion of Beneficiaries (%) 19 27 27 23 21 17 24
Average Top-up Benefit
(% of Maximum Additional Top-up)
53 53 51 49 47 46 51
GIS Spouse
not a Pensioner
Proportion of Beneficiaries (%) 13 15 19 33 46 46 19
Average Top-up Benefit
(% of Maximum Additional Top-up)
48 52 55 57 58 56 53
Age
60 61 62 63 64 All
Allowance
for the Survivor
Proportion of Beneficiaries (%) 20 18 17 18 14 17
Average Top-up Benefit
(% of Maximum Additional Top-up)
48 44 46 50 52 48
FEMALES
Benefit Age
65 70 75 80 85 90+ All
GIS Single Proportion of Beneficiaries (%) 20 24 24 24 25 28 25
Average Top-up Benefit
(% of Maximum Additional Top-up)
51 51 48 48 47 52 50
GIS Spouse
not a Pensioner
Proportion of Beneficiaries (%) 11 13 16 18 14 12 15
Average Top-up Benefit
(% of Maximum Additional Top-up)
45 51 55 58 59 65 56
Age
60 61 62 63 64 All
Allowance
for the Survivor
Proportion of Beneficiaries (%) 24 21 21 22 21 21
Average Top-up Benefit
(% of Maximum Additional Top-up)
48 49 50 47 46 48

Table 2 presents illustrative impacts on the GIS amounts payable before and after the amendment that increases the top-up for single individuals as they are depicted in Chart 1 above for typical income levels.

Table 2 - Illustrative Impact on GIS Single Benefit Payable1 (2016)
Illustrative Impacts for Individuals From Chart 1
Table 2 - Image A Table 2 - Image B Table 2 - Image C Table 2 - Image D
Annual Income Level ($2016)
No Income 1,000 3,500 6,500 13,000
GIS Single Annualized Average GIS ($2016)
Base 8,825 8,325 7,075 5,575 2,325
Top-Up 645 645 270 - -
Total 9,470 8,970 7,345 5,575 2,325
New Annualized Average GIS ($2016)
Base 8,825 8,325 7,075 5,575 2,325
Top-Up 1,592 1,592 1,217 467 -
Total 10,417 9,917 8,292 6,042 2,325
Annualized Increase in GIS (2016)
Base - - - - -
- - - - -
Top-Up $947 $947 $947 $467 -
147% 147% 351% N/A -
Total $947 $947 $947 $467 -
10.0% 10.6% 12.9% 8.4% -
Table 2 Footnote 1

Estimated based on projected GIS Single annualized maximum rate for 2016 for someone receiving the maximum OAS basic pension.

Return to footnote 1 referrer

B. Results

Impact on Overall OAS Program Financial Status

Table 3 shows the financial status of the OAS program as presented in the 12th OAS Program Actuarial Report as at 31 December 2012. Table 4 presents the same information but amended for the increase in the GIS and Allowance top-up, while Table 5 presents the change in the financial status due to the increase in the top-up.

Table 5 reveals that over the first five years expenditures are projected to increase from $315 million in 2016 to $775 million in 2020. This represents an overall increase in expenditures of $3.2 billion over that period relative to the 12th OAS Program Actuarial Report. By 2030, expenditures are projected to be $1.2 billion higher than under the 12th OAS Program Actuarial Report or 0.03% higher relative to the GDP. The total number of program beneficiaries remains unchanged.

Table 3 - Financial Status of OAS Program before any Amendments1
Calendar Year Number of Beneficiaries
(thousands)
Expenditures
($ million)
GDP
($ billion)
Expenditures
as a Percentage
of GDP
OAS GIS / Allowance OAS GIS / Allowance Admin. Expenses Total2
2016 5,896 1,957 38,892 11,010 172 50,074 2,056 2.44
2017 6,110 2,022 41,109 11,586 182 52,877 2,118 2.50
2018 6,335 2,094 43,477 12,211 192 55,880 2,197 2.54
2019 6,574 2,165 46,021 12,824 203 59,048 2,280 2.59
2020 6,824 2,243 48,757 13,523 215 62,494 2,369 2.64
2021 7,072 2,323 51,628 14,265 227 66,120 2,464 2.68
2022 7,329 2,409 54,679 15,071 241 69,991 2,562 2.73
2023 7,480 2,477 57,511 15,834 253 73,599 2,664 2.76
2024 7,591 2,534 59,633 16,477 263 76,372 2,767 2.76
2025 7,700 2,598 61,814 17,176 273 79,263 2,874 2.76
2030 8,396 2,913 74,263 21,001 329 95,592 3,503 2.73
2040 9,796 3,257 107,816 28,937 472 137,224 5,211 2.63
2050 10,513 3,298 144,189 36,293 623 181,105 7,638 2.37
Table 3 Footnote 1

12th OAS Program Actuarial Report as at 31 December 2012.

Return to footnote 1 referrer

Table 3 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 4 - Financial Status of OAS Program after Increase in Top-Up Benefit
Calendar Year Number of Beneficiaries
(thousands)
Expenditures
($ million)
GDP
($ billion)
Expenditures
as a Percentage
of GDP
OAS GIS / Allowance OAS GIS / Allowance Admin. Expenses Total1
2016 5,896 1,957 38,892 11,325 172 50,389 2,056 2.45
2017 6,110 2,022 41,109 12,249 182 53,540 2,118 2.53
2018 6,335 2,094 43,477 12,911 192 56,581 2,197 2.58
2019 6,574 2,165 46,021 13,558 203 59,782 2,280 2.62
2020 6,824 2,243 48,757 14,297 215 63,269 2,369 2.67
2021 7,072 2,323 51,628 15,083 227 66,938 2,464 2.72
2022 7,329 2,409 54,679 15,938 241 70,858 2,562 2.77
2023 7,480 2,477 57,511 16,743 253 74,507 2,664 2.80
2024 7,591 2,534 59,633 17,419 263 77,314 2,767 2.79
2025 7,700 2,598 61,814 18,160 273 80,247 2,874 2.79
2030 8,396 2,913 74,263 22,216 329 96,808 3,503 2.76
2040 9,796 3,257 107,816 30,659 472 138,946 5,211 2.67
2050 10,513 3,298 144,189 38,500 623 183,312 7,638 2.40
Table 4 Footnote 1

Components may not sum to totals due to rounding.

Return to footnote 1 referrer

Table 5 - Change in Financial Status of OAS Program due to Increase in Top-Up Benefit1
Calendar
Year
Change in Number of Beneficiaries
(thousands)
Change in Expenditures
($ million)
GDP
($ billion)
Change in Expenditures
as a Percentage
of GDP
OAS GIS /
Allowance
OAS GIS /
Allowance
Admin.
Expenses
Total
2016 - - - 315 - 315 2,056 0.01
2017 - - - 664 - 663 2,118 0.03
2018 - - - 701 - 701 2,197 0.04
2019 - - - 734 - 734 2,280 0.03
2020 - - - 775 - 775 2,369 0.03
2021 - - - 818 - 818 2,464 0.04
2022 - - - 866 - 867 2,562 0.04
2023 - - - 908 - 908 2,664 0.04
2024 - - - 941 - 942 2,767 0.03
2025 - - - 984 - 984 2,874 0.03
2030 - - - 1,216 - 1,216 3,503 0.03
2040 - - - 1,722 - 1,722 5,211 0.04
2050 - - - 2,207 - 2,207 7,638 0.03
Table 5 Footnote 1

Table 5 is the difference between Tables 4 and 3.

Return to footnote 1 referrer

Detailed Impact on GIS and Allowance Beneficiaries

Tables 6 and 7 show the projected number of GIS and Allowance beneficiaries as presented in the 12th OAS Program Actuarial Report as at 31 December 2012 and as amended by the increase in the top-up benefit. For comparison purposes, Table 8 shows the differences between these two tables.

Tables 6 through 8 reveal that, over the first five years, the total number of beneficiaries who will receive either the full or partial additional top-up benefit (see Table 7) is projected to grow from 813,000 to 925,000. This comprises an increase from 514,000 to 584,000 of the number of current top-up beneficiaries (Table 6) who would receive the full additional top-up and an increase from 299,000 to 341,000 (Table 8) of the number of new top-up beneficiaries who would receive a partial additional top-up.

By 2030, about 1.2 million beneficiaries (Table 7) are projected to receive a top-up benefit, which represents an increase of about 445,000 (Table 8) in the number of beneficiaries receiving a top-up benefit compared to the 12th OAS Program Actuarial Report projections. Of these new additional 445,000 top-up beneficiaries, about 417,000 would receive the GIS for single seniors, 25,000 would receive the GIS for seniors whose spouse is not a pensioner, and 3,000 would receive the Allowance for the Survivor.

Table 6 - GIS and Allowance Beneficiaries before any Amendments1
Calendar Year Number of Beneficiaries (thousands) Number of Beneficiaries Receiving the Top-Up (thousands)
GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2 GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2
2016 1,119 105 20 1,243 473 35 6 514
2017 1,159 107 19 1,284 490 36 6 532
2018 1,202 109 18 1,329 508 37 5 551
2019 1,241 113 18 1,372 522 38 5 565
2020 1,287 117 17 1,421 540 39 5 584
2021 1,334 121 17 1,472 559 40 5 604
2022 1,385 125 17 1,527 579 42 5 626
2023 1,428 126 16 1,570 594 42 5 642
2024 1,462 126 16 1,604 603 43 5 650
2025 1,502 126 16 1,644 615 43 5 663
2030 1,716 124 13 1,853 681 47 4 732
2040 2,014 124 8 2,146 775 51 3 828
2050 2,105 122 7 2,234 798 50 2 850
Table 6 Footnote 1

12th OAS Program Actuarial Report as at 31 December 2012. The table excludes persons who are unaffected by the amendment – GIS recipients whose spouse is a pensioner or Allowance recipient, and recipients of the regular Allowance.

Return to footnote 1 referrer

Table 6 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 7 - GIS and Allowance Beneficiaries after Increasing the Top-Up Benefit1
Calendar Year Number of Beneficiaries (thousands) Number of Beneficiaries Receiving the Additional Top-Up (includes new Top-Up Beneficiaries) (thousands)
GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2 GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2
2016 1,119 105 20 1,243 749 54 10 813
2017 1,159 107 19 1,284 775 55 10 840
2018 1,202 109 18 1,329 804 57 9 869
2019 1,241 113 18 1,372 827 58 9 894
2020 1,287 117 17 1,421 856 60 9 925
2021 1,334 121 17 1,472 885 62 9 956
2022 1,385 125 17 1,527 918 64 9 991
2023 1,428 126 16 1,570 943 65 8 1,017
2024 1,462 126 16 1,604 960 66 8 1,034
2025 1,502 126 16 1,644 982 67 8 1,057
2030 1,716 124 13 1,853 1,098 72 7 1,177
2040 2,014 124 8 2,146 1,263 78 4 1,346
2050 2,105 122 7 2,234 1,308 77 4 1,389
Table 7 Footnote 1

The table excludes persons who are unaffected by the amendment – GIS recipients whose spouse is a pensioner or Allowance recipient, and recipients of the regular Allowance.

Return to footnote 1 referrer

Table 7 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 8 - Change in GIS and Allowance Beneficiaries due to Increased Top-Up Benefit1
Calendar Year Change in Number of Beneficiaries (thousands) Change in Number of Beneficiaries Receiving the Top-Up (new top-up beneficiaries) (thousands)3
GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2 GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2
2016 - - - - 276 19 4 299
2017 - - - - 285 19 4 308
2018 - - - - 295 20 4 319
2019 - - - - 305 20 4 329
2020 - - - - 316 21 4 341
2021 - - - - 327 22 4 352
2022 - - - - 339 23 3 365
2023 - - - - 349 23 3 375
2024 - - - - 358 23 3 384
2025 - - - - 367 23 3 394
2030 - - - - 417 25 3 445
2040 - - - - 489 27 2 518
2050 - - - - 511 27 1 539
Table 8 Footnote 1

Table 8 is the difference between Tables 7 and 6.

Return to footnote 1 referrer

Table 8 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 8 Footnote 3

This number represents the number of new top-up recipients due to the increased income limits of the increased top-up.

Return to footnote 3 referrer

Detailed Impact on GIS and Allowance Expenditures

Table 9 shows the projected GIS and Allowance expenditures by type of benefit as presented in the 12th OAS Program Actuarial Report as at 31 December 2012 and as amended by the increase in the top-up benefit. For comparison purposes, Table 10 shows the change in expenditures resulting from the increase in the top-up benefit. Note that these tables exclude persons who are unaffected by the amendment – GIS recipients whose spouse is a pensioner or Allowance recipient, and recipients of the regular Allowance.

Table 10 reveals that, over the first five years, the increase in GIS single expenditures is projected to grow from $289 million in 2016 to $716 million in 2020. By 2030, GIS single expenditures are projected to be $1.1 billion or about 8% higher than projected under the 12th OAS Program Actuarial Report.

Table 10 also reveals that, over the first five years, the increase in GIS spouse not a pensioner expenditures is projected to grow from $22 million in 2016 to $52 million in 2020. By 2030, GIS spouse not a pensioner expenditures are projected to be $78 million or about 8% higher than projected under the 12th OAS Program Actuarial Report.

Finally, Table 10 shows that, over the first five years, the increase in Allowance for the Survivor expenditures is projected to grow from $4 million in 2016 to $7 million in 2020. In 2030, Allowance for the Survivor expenditures are projected to be $7 million or about 4.5% higher than projected under the 12th OAS Program Actuarial Report.

Table 9 - GIS and Allowance Expenditures1
Calendar Year Expenditures 12th OAS Actuarial Report ($ million) Expenditures After Increasing Top-Up ($ million)
GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2 GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2
2016 7,169 593 172 7,933 7,459 614 175 8,248
2017 7,565 614 166 8,345 8,177 659 173 9,009
2018 7,992 641 164 8,797 8,638 688 171 9,497
2019 8,388 675 164 9,227 9,065 724 172 9,961
2020 8,861 712 164 9,737 9,577 763 171 10,511
2021 9,364 749 164 10,277 10,121 804 171 11,096
2022 9,917 789 164 10,870 10,718 847 171 11,737
2023 10,456 823 159 11,438 11,297 883 166 12,346
2024 10,889 841 163 11,892 11,762 903 169 12,834
2025 11,390 859 162 12,410 12,302 923 169 13,394
2030 14,170 962 155 15,288 15,301 1,040 162 16,503
2040 20,352 1,215 124 21,691 21,963 1,321 130 23,414
2050 26,183 1,472 131 27,786 28,255 1,601 137 29,993
Table 9 Footnote 1

The table excludes benefit expenditures pertaining to individuals unaffected by the amendment – GIS recipients whose spouse is a pensioner or Allowance recipient, and recipients of the regular Allowance.

Return to footnote 1 referrer

Table 9 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 10 - Change in GIS and Allowance Expenditures due to Increased Top-Up Benefit1
Calendar Year Change in Expenditures ($ million) Change in Expenditures (%)
GIS Single GIS Spouse not a Pensioner Allowance Survivor Total2 GIS Single GIS Spouse not a Pensioner Allowance Survivor Total
2016 289 22 4 315 4.0 3.6 2.2 4.0
2017 612 45 7 664 8.1 7.3 4.5 8.0
2018 647 47 7 701 8.1 7.3 4.5 8.0
2019 677 49 7 734 8.1 7.3 4.5 8.0
2020 716 52 7 775 8.1 7.3 4.5 8.0
2021 756 54 7 818 8.1 7.3 4.5 8.0
2022 802 57 7 866 8.1 7.3 4.5 8.0
2023 841 60 7 908 8.0 7.3 4.4 7.9
2024 874 62 6 941 8.0 7.4 3.7 7.9
2025 912 64 7 984 8.0 7.5 4.6 7.9
2030 1,131 78 7 1,216 8.0 8.1 4.5 8.0
2040 1,611 105 6 1,722 7.9 8.7 4.5 7.9
2050 2,072 129 6 2,207 7.9 8.7 4.5 7.9
Table 10 Footnote 1

Change is relative to the best-estimate projections of the 12th OAS Program Actuarial Report. The table excludes benefit expenditures pertaining to individuals unaffected by the amendment – GIS recipients whose spouse is a pensioner or Allowance recipient, and recipients of the regular Allowance.

Return to footnote 1 referrer

Table 10 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

2. Impact of Cancelling Increase in Ages of Eligibility

A. Assumptions and Methods

For the purpose of cancelling the provisions in the Old Age Security Act that increase the ages of eligibility for the OAS basic pension and the GIS benefit from 65 to 67 and Allowance benefits from 60 to 62 over the 2023 to 2029 period, the age of eligibility for the OAS basic pension and GIS benefit is assumed to remain at 65 and to remain at age 60 for Allowance benefits throughout the projection period.

B. Results

Table 11 presents the financial status of the OAS program as amended for the increase in the single rate GIS and Allowance for the Survivor top-up benefits (see Section 1 above) as well as for cancelling the increase in the ages of eligibility.

Table 11 - Financial Status of OAS Program after All Amendments
Calendar Year Number of Beneficiaries (thousands) Expenditures ($ million) GDP
($ billion)
Expenditures
as a Percentage
of GDP
OAS GIS /
Allowance
OAS GIS /
Allowance
Admin. Expenses Total1
2016 5,896 1,957 38,892 11,325 172 50,389 2,056 2.45
2017 6,110 2,022 41,109 12,249 182 53,540 2,118 2.53
2018 6,335 2,094 43,477 12,911 192 56,581 2,197 2.58
2019 6,574 2,165 46,021 13,558 203 59,782 2,280 2.62
2020 6,824 2,243 48,757 14,297 215 63,269 2,369 2.67
2021 7,072 2,323 51,628 15,083 227 66,938 2,464 2.72
2022 7,329 2,409 54,679 15,938 241 70,858 2,562 2.77
2023 7,589 2,497 57,866 16,825 255 74,946 2,664 2.81
2024 7,848 2,580 61,151 17,681 269 79,101 2,767 2.86
2025 8,111 2,670 64,584 18,632 284 83,500 2,874 2.91
2030 9,393 3,100 83,191 23,647 364 107,202 3,503 3.06
2040 10,672 3,414 116,959 32,157 508 149,624 5,211 2.87
2050 11,561 3,472 157,387 40,562 675 198,625 7,638 2.60
Table 11 Footnote 1

Components may not sum to totals due to rounding.

Return to footnote 1 referrer

Table 12 shows the difference between Tables 11 and 4, which allows for the measurement of the impact of cancelling the increase in the ages of eligibility after increasing the top-up benefit. Table 12 reveals that cancelling the increase in the ages of eligibility is projected to result in 109,000 additional beneficiaries receiving the OAS basic pension in 2023 and about 1 million more beneficiaries by 2030. Cancelling the increase in the ages of eligibility is also projected to result in 19,000 additional GIS and Allowance beneficiaries in 2023 and about 187,000 more by 2030.

Total expenditures are projected to increase by $439 million in 2023 and by $10.4 billion in 2030. As such, by 2030, expenditures expressed as a percentage of the GDP would be higher by about 0.3% of the GDP compared to only increasing the top-up benefit.

Table 12 - Change in Financial Status Due to Cancelling the Increase in Ages of Eligibility
(after Increase in Top-Up Benefit)1
Calendar Year Change in Number of Beneficiaries (thousands) Change in Expenditures ($ million) GDP
($ billion)
Expenditures
as a Percentage
of GDP
OAS GIS /
Allowance
OAS GIS /
Allowance
Admin. Expenses3 Total2
2016 - - - - - - 2,056 0.00
2017 - - - - - - 2,118 0.00
2018 - - - - - - 2,197 0.00
2019 - - - - - - 2,280 0.00
2020 - - - - - - 2,369 0.00
2021 - - - - - - 2,464 0.00
2022 - - - - - - 2,562 0.00
2023 109 19 355 82 1 439 2,664 0.01
2024 257 46 1,518 262 6 1,787 2,767 0.07
2025 412 72 2,770 472 11 3,253 2,874 0.12
2030 997 187 8,928 1,430 36 10,394 3,503 0.30
2040 876 157 9,143 1,498 37 10,678 5,211 0.20
2050 1,048 175 13,198 2,062 52 15,313 7,638 0.20
Table 12 Footnote 1

Table 12 is the difference between Tables 11 and 4.

Return to footnote 1 referrer

Table 12 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 12 Footnote 3

As per the 12th OAS Program Actuarial Report, administrative expenses are assumed to be 0.35% of total annual benefit payments. As a result of cancelling the increase in the ages of eligibility, it is projected that administrative expenses will increase.

Return to footnote 3 referrer

3. Impact of All Amendments

Table 13 shows the difference between Tables 11 and 3 and enables the measurement of the impact of all amendments.

The number of program beneficiaries is not projected to increase over the period 2016 through 2022. Thereafter, due to the cancellation of the increase in the ages of eligibility, the number of beneficiaries of the OAS basic pension gradually increases by about 1 million by 2030, and the number of GIS and Allowance beneficiaries gradually increases by about 187,000 by the same year.

Both amendments are projected to increase total program expenditures by $11.6 billion in 2030, which represents an increase of 0.33% of GDP. Chart 2 illustrates the cost of the OAS program expressed as a percentage of the GDP under the 12th OAS Program Actuarial Report, after the amendment for the top-up benefit, and after all amendments.

Table 13 - Change in Financial Status Due to All Amendments1
Calendar Year Change in Number of Beneficiaries (thousands) Change in Expenditures ($ million) GDP
($ billion)
Expenditures
as a Percentage
of GDP
OAS GIS /
Allowance
OAS GIS /
Allowance
Admin. Expenses3 Total2
2016 - - - 315 - 315 2,056 0.01
2017 - - - 664 - 663 2,118 0.03
2018 - - - 701 - 701 2,197 0.04
2019 - - - 734 - 734 2,280 0.03
2020 - - - 775 - 775 2,369 0.03
2021 - - - 818 - 818 2,464 0.04
2022 - - - 866 - 867 2,562 0.04
2023 109 19 355 991 1 1,347 2,664 0.05
2024 257 46 1,518 1,204 6 2,729 2,767 0.10
2025 412 72 2,770 1,456 11 4,237 2,874 0.15
2030 997 187 8,928 2,646 36 11,610 3,503 0.33
2040 876 157 9,143 3,220 37 12,400 5,211 0.24
2050 1,048 175 13,198 4,269 52 17,520 7,638 0.23
Table 13 Footnote 1

Table 13 is the difference between Tables 11 and 3.

Return to footnote 1 referrer

Table 13 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 13 Footnote 3

As per the 12th OAS Program Actuarial Report, administrative expenses are assumed to be 0.35% of total annual benefit payments. As a result of cancelling the increase in the ages of eligibility, it is projected that administrative expenses will increase.

Return to footnote 3 referrer

Chart 2 - OAS Program Expenditures as a Percentage of GDP
Chart 2

V. Conclusion

This 13th OAS Program Actuarial Report shows the following:

Increasing the GIS Top-Up Benefit

  • The increase in GIS and Allowance expenditures is projected to be $315 million in 2016 and $775 million by 2020. GIS and Allowance expenditures are thus projected to be $3.2 billion higher than under the 12th OAS Program Actuarial Report over the period 2016 through 2020.
  • The projected number of GIS and Allowance beneficiaries who will receive the full or a partial additional top-up benefit is estimated to grow from 813,000 in 2016 to 925,000 by 2020.
  • By 2030, GIS and Allowance expenditures are projected to be $1.2 billion or 0.03% of the GDP higher than projected under the 12th OAS Program Actuarial Report.

Cancelling the Increase in Ages of Eligibility

  • By 2030, cancelling the increase in the ages of eligibility for OAS benefits is projected to increase the number of beneficiaries of the OAS basic pension by 1 million and increase the number of GIS and Allowance beneficiaries by 187,000.
  • By 2030, cancelling the increase in the ages of eligibility is projected to increase total program expenditures by $10.4 billion. This represents an increase of 0.3% of GDP.

All Amendments

  • Taken together, the amendments are projected to increase total program expenditures by $11.6 billion by 2030, which represents an increase of 0.33% of GDP.

VI. Actuarial Opinion

In our opinion, considering that this 13th Actuarial Report on the Old Age Security Program was prepared pursuant to the Public Pensions Reporting Act:

  • the data on which this report is based are sufficient and reliable;
  • the assumptions used are, individually and in aggregate, reasonable and appropriate; and,
  • the methods employed are appropriate for the purposes of this report.

This report has been prepared, and our opinions given, in accordance with both accepted actuarial practice in Canada, in particular, the General Standards of Practice of the Canadian Institute of Actuaries, and internationally accepted actuarial practice as provided by the International Standards of Actuarial Practice for General Actuarial Practice (ISAP 1) and Financial Analysis of Social Security Programs (ISAP 2) of the International Actuarial Association.

Signatures

Ottawa, Canada
15 July 2016

Appendix A – Detailed Tables of Projections Including All Amendments

Table 14 - OAS Program Beneficiaries (Projected)1
Calendar Year Number of Beneficiaries Recipient Rates
OAS
(thousands)
GIS
(thousands)
Allowance
(thousands)
OAS
(%)
GIS
(%)
Allowance
(%)
2016 5,896 1,882 75 98.2 31.4 3.3
2017 6,110 1,948 74 98.3 31.4 3.1
2018 6,335 2,020 74 98.4 31.4 3.0
2019 6,574 2,091 74 98.5 31.3 3.0
2020 6,824 2,169 74 98.5 31.3 2.9
2021 7,072 2,250 74 98.5 31.3 2.8
2022 7,329 2,335 73 98.6 31.4 2.8
2023 7,589 2,423 73 98.6 31.5 2.7
2024 7,848 2,506 73 98.7 31.5 2.7
2025 8,111 2,597 73 98.7 31.6 2.7
2026 8,378 2,691 71 98.8 31.7 2.7
2027 8,637 2,786 69 98.8 31.9 2.7
2028 8,903 2,883 66 98.8 32.0 2.6
2029 9,160 2,976 63 98.9 32.1 2.6
2030 9,393 3,041 60 98.9 32.0 2.5
2031 9,588 3,097 58 99.0 32.0 2.4
2032 9,751 3,145 57 99.1 32.0 2.4
2033 9,898 3,187 56 99.2 32.0 2.4
2034 10,037 3,223 55 99.3 31.9 2.3
2035 10,172 3,258 54 99.3 31.8 2.3
2036 10,300 3,290 52 99.4 31.7 2.2
2037 10,408 3,315 52 99.4 31.7 2.2
2038 10,503 3,335 52 99.5 31.6 2.1
2039 10,586 3,349 52 99.5 31.5 2.1
2040 10,672 3,362 51 99.5 31.4 2.1
2045 11,072 3,396 52 99.5 30.5 1.9
2050 11,561 3,421 51 99.4 29.4 1.7
2055 12,118 3,456 49 99.4 28.3 1.6
2060 12,703 3,498 42 99.4 27.4 1.5
Table 14 Footnote 1

The projected OAS basic pension recipient rates and number of beneficiaries are on a gross basis; that is, before application of the OAS Recovery Tax. The GIS and Allowance benefit recipient rates and number of beneficiaries account for Tax-Free Savings Accounts. All recipient rates include benefits paid outside Canada and for this reason can exceed 100%.

Return to footnote 1 referrer

Table 15 - OAS Program Expenditures and Average Annual Benefits (Projected)1
Calendar Year Expenditures ($ million) Average Annual Benefit ($)
OAS GIS Allowance Administrative Expenses Total2 OAS GIS Allowance
2016 38,892 10,818 507 172 50,389 6,597 5,748 6,748
2017 41,109 11,737 512 182 53,540 6,728 6,024 6,927
2018 43,477 12,391 520 192 56,581 6,863 6,134 7,061
2019 46,021 13,026 531 203 59,782 7,000 6,231 7,193
2020 48,757 13,758 540 215 63,269 7,145 6,342 7,335
2021 51,628 14,533 551 227 66,938 7,300 6,460 7,477
2022 54,679 15,377 561 241 70,858 7,461 6,584 7,632
2023 57,866 16,254 571 255 74,946 7,625 6,708 7,786
2024 61,151 17,100 581 269 79,101 7,792 6,823 7,942
2025 64,584 18,044 588 284 83,500 7,962 6,947 8,106
2026 68,151 19,023 589 299 88,062 8,134 7,070 8,275
2027 71,772 20,044 586 315 92,717 8,309 7,196 8,439
2028 75,577 21,110 573 331 97,591 8,489 7,322 8,622
2029 79,424 22,145 555 348 102,471 8,671 7,440 8,805
2030 83,191 23,110 536 364 107,202 8,857 7,600 8,986
2031 86,731 24,045 528 379 111,683 9,046 7,764 9,149
2032 90,086 24,941 528 394 115,949 9,239 7,931 9,314
2033 93,408 25,823 529 408 120,168 9,437 8,102 9,492
2034 96,753 26,661 530 423 124,367 9,640 8,271 9,680
2035 100,173 27,528 529 437 128,667 9,848 8,448 9,875
2036 103,625 28,392 528 452 132,996 10,060 8,629 10,079
2037 106,973 29,224 532 466 137,195 10,278 8,815 10,268
2038 110,276 30,034 540 480 141,330 10,500 9,005 10,466
2039 113,557 30,810 550 494 145,411 10,727 9,198 10,668
2040 116,959 31,597 560 508 149,624 10,959 9,397 10,886
2045 135,169 35,533 628 584 171,914 12,208 10,462 12,014
2050 157,387 39,887 675 675 198,625 13,614 11,658 13,288
2055 184,199 44,857 719 784 230,560 15,201 12,981 14,696
2060 215,347 50,440 683 910 267,380 16,953 14,419 16,271
Table 15 Footnote 1

The projected OAS basic pension expenditures and average benefits are on a gross basis; that is, before application of the OAS Recovery Tax. The GIS and Allowance expenditures and average benefits account for Tax-Free Savings Accounts. All expenditures include benefits paid outside of Canada.

Return to footnote 1 referrer

Table 15 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Table 16 - OAS Program Expenditures as Percentage of GDP (Projected)
Calendar Year Gross
Domestic Product
($ billion)
Expenditures as % of Gross Domestic Product1
OAS
(%)
GIS
(%)
Allowance
(%)
Administrative
Expenses
(%)
Total2
(%)
2016 2,056 1.89 0.53 0.02 0.01 2.45
2017 2,118 1.94 0.55 0.02 0.01 2.53
2018 2,197 1.98 0.56 0.02 0.01 2.58
2019 2,280 2.02 0.57 0.02 0.01 2.62
2020 2,369 2.06 0.58 0.02 0.01 2.67
2021 2,464 2.10 0.59 0.02 0.01 2.72
2022 2,562 2.13 0.60 0.02 0.01 2.77
2023 2,664 2.17 0.61 0.02 0.01 2.81
2024 2,767 2.21 0.62 0.02 0.01 2.86
2025 2,874 2.25 0.63 0.02 0.01 2.91
2026 2,987 2.28 0.64 0.02 0.01 2.95
2027 3,107 2.31 0.65 0.02 0.01 2.98
2028 3,232 2.34 0.65 0.02 0.01 3.02
2029 3,364 2.36 0.66 0.02 0.01 3.05
2030 3,503 2.38 0.66 0.02 0.01 3.06
2031 3,639 2.38 0.66 0.01 0.01 3.07
2032 3,784 2.38 0.66 0.01 0.01 3.06
2033 3,936 2.37 0.66 0.01 0.01 3.05
2034 4,096 2.36 0.65 0.01 0.01 3.04
2035 4,262 2.35 0.65 0.01 0.01 3.02
2036 4,436 2.34 0.64 0.01 0.01 3.00
2037 4,619 2.32 0.63 0.01 0.01 2.97
2038 4,810 2.29 0.62 0.01 0.01 2.94
2039 5,007 2.27 0.62 0.01 0.01 2.90
2040 5,211 2.24 0.61 0.01 0.01 2.87
2045 6,334 2.13 0.56 0.01 0.01 2.71
2050 7,638 2.06 0.52 0.01 0.01 2.60
2055 9,181 2.01 0.49 0.01 0.01 2.51
2060 11,092 1.94 0.45 0.01 0.01 2.41
Table 16 Footnote 1

The projected OAS basic pension expenditures are on a gross basis; that is, before application of the OAS Recovery Tax. The GIS and Allowance expenditures account for Tax-Free Savings Accounts. All expenditures include benefits paid outside of Canada.

Return to footnote 1 referrer

Table 16 Footnote 2

Components may not sum to totals due to rounding.

Return to footnote 2 referrer

Appendix B – Acknowledgements

Service Canada provided statistics on the Old Age Security program.

The co-operation and able assistance received from the above-mentioned data provider deserve to be acknowledged.

The following people assisted in the preparation of this report:

Patrick Dontigny, A.S.A.
Sari Harrel, F.S.A, F.C.I.A.
Kelly Moore
Louis-Marie Pommainville, F.S.A, F.C.I.A.

Footnotes

Footnote 1

The increase in the top-up of $947 on an annualized basis for 2016 corresponds to 10% of the projected maximum annualized GIS single rate of $9,470 for 2016, as per the 12th OAS Program Actuarial Report.

Return to footnote 1 referrer

Footnote 2

The increase in the top-up of $947 on an annualized basis for 2016 corresponds to 10% of the projected maximum annualized GIS single rate of $9,470 for 2016, as per the 12th OAS Program Actuarial Report.

Return to footnote 2 referrer