Office of the Superintendent of Financial Institutions
The Honourable Deb Schulte, P.C., M.P.
Minister of Seniors House of Commons Ottawa, Canada K1A 0A6
In accordance with section 4 of the
Public Pensions Reporting Act, which provides that the Minister shall cause the Chief Actuary to conduct an actuarial review of the Old Age Security program when an amendment to the
Old Age Security Act is made that affects the cost of benefits, I am pleased to submit the 17th Actuarial Report on the Old Age Security program.
Assia Billig, FCIA, FSA, PhD Chief Actuary
This is the 17th 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 is the 16th Actuarial Report on the Old Age Security (OAS) Program, which was tabled in the House of Commons on 20 October 2020. Therefore, this 17th Actuarial Report has been prepared on the basis of the 16th Actuarial Report to show the effect of Division 31 of Part 4 of Bill C-30 on the long‑term financial status of the OAS program.
Division 31 of Part 4 of Bill C-30, the
Budget Implementation Act, 2021, No. 1, received Royal Assent on 29 June 2021. It amends the
Old Age Security Act to increase the OAS pension payable to individuals aged 75 or older by 10%, effective 1 July 2022. The increase will apply to all basic pension amounts, including voluntarily deferred pensions. The additional benefits will be indexed to inflation going forward.
Bill C-30 also provides for a one-time payment of $500 in August 2021 to OAS pensioners who will be age 75 or older as of June 2022. This one-time payment will be exempt from the definition of income for the Guaranteed Income Supplement and will be funded through a statutory appropriation as opposed to being part of the
Old Age Security Act and, as such, is not reflected in the cost estimates presented in this report.
This report has been prepared in compliance with section 4 of the
Public Pensions Reporting Act, which provides that:
The financial estimates presented in this report use the same actuarial assumptions and methods as per the 16th OAS Program Actuarial Report as at 31 December 2018. A micro-simulation analysis was performed using the 2019 OAS program database (provided by Service Canada (Employment and Social Development Canada)) to determine the impacts of the 10% increase. Those impacts were used to calibrate the aggregate valuation model used to produce the estimates for this report.
The 10% increase in the OAS basic pension will be based on the actual pension amount payable before the increase, and so will vary based on that amount (i.e. either a partial or maximum pension, including actuarially adjusted pensions for those who voluntarily defer take-up of their pensions). It is estimated that the 10% increase in the maximum monthly OAS basic pension at age 65 will be $63.83 in July 2022 (applicable to benefits paid from July to September 2022) based on the projections of the 16th OAS Program Actuarial Report.
Table 1 presents illustrative impacts on the amounts of the OAS basic pension payable before and after the 10% increase for various levels of the pension. For instance, the 10% increase represents a maximum annual increase of $766 for a full pensioner. For a partial pensioner receiving 50% of the full pension, the annual increase would be $383.
Estimated annualized benefits based on the projected OAS annualized maximum basic pension in July 2022 of $7,660 as per the 16th OAS Program Actuarial Report. Illustrative amounts shown are for individuals who do not voluntarily defer take-up of the pension. For beneficiaries who voluntarily defer take-up of their pension, the additional increase of 10% would apply to their actuarially adjusted pension amount. For example, for an individual who receives a deferred pension of $800 per month, the additional benefit would be $80 (10% of $800). This additional amount will be indexed to inflation thereafter.
Return to table footnote 1
The 10% increase would apply to the OAS basic pension and not to GIS or Allowance benefits. However, the increase would affect the additional amount payable to GIS beneficiaries aged 75 and older who receive the Super GIS benefit (i.e. those GIS beneficiaries who receive partial OAS pensions due to having less than 40 years of Canadian residency). This would occur since the additional amount payable to those GIS beneficiaries equals the difference of the maximum and partial basic pension. Since all basic pensions (maximum or partial) would increase by 10%, the additional amount payable would also increase by 10%. Note that the resulting increase in the Super GIS benefit (GIS plus additional amount) would be lower than 10% since only the additional amount would increase and not the core GIS benefit.
Moreover, a 10% increase in the basic pension could result in new Super GIS beneficiaries. The reason is that the resulting higher Super GIS benefit would extend the income range over which the benefit is payable before it is fully reduced by income testing. The new Super GIS beneficiaries would be those individuals with sufficiently high income between the current and new maximum income levels who would have otherwise had their benefits fully reduced by income testing. However, it has been determined that the number of such new Super GIS beneficiaries with higher incomes at ages 75 and older would be negligible.
For GIS beneficiaries whose spouse either does not receive any OAS program benefit or who does receive the regular Allowance benefit, the corresponding income-testing thresholds, which are linked to the maximum OAS basic pension (at age 65), would remain at their current (inflation-indexed) levels and not be affected by the proposed 10% increase. Likewise, the OAS-equivalent portion of the Allowance benefit (regular and survivor) and corresponding income limit of the portion would also remain at their current levels. As such, the number of non-Super GIS and Allowance (regular and survivor) beneficiaries and the amounts of their benefits would be unaffected by the increase in the basic pension.
For comparison purposes, Table 2 shows the financial status of the OAS program as it is presented in the 16th OAS Actuarial Report as at 31 December 2018. Table 3 presents the financial status of the OAS program as amended by Division 31 of Part 4 of Bill C-30, and Table 4 presents the impacts of the amendments on the financial status of the OAS program (the differences between the financial results presented in Tables 3 and 2) and the projected number of affected beneficiaries.
16th OAS Program Actuarial Report as at 31 December 2018.
Differences between Tables 3 and 2.
Return to table footnote *
The 17th OAS Program Actuarial Report shows that:
In our opinion, considering that this 17th Actuarial Report on the Old Age Security program was prepared pursuant to the
Public Pensions Reporting Act:
This report has been prepared, and our opinion given, in accordance with accepted actuarial practice in Canada, in particular, the General Standards of Practice and the Practice-Specific Standards for Social Security Programs of the Standards of Practice of the Canadian Institute of Actuaries.
As of the date of the signing of this report, we have not learned of any events that would have a material impact on the results presented in this report.
Assia Billig, FCIA, FSA Chief Actuary
Michel Montambeault, FCIA, FSA
Ottawa, Canada8 September 2021
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 (TFSAs). All recipient rates include benefits paid outside Canada and for this reason can exceed 100%.
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 TFSAs. All expenditures include benefits paid outside of Canada.
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 TFSAs. All expenditures include benefits paid outside of Canada.
Service Canada provided statistics on the Old Age Security program.
The Canada Revenue Agency provided income tax return information.
The co-operation and able assistance received from the above-mentioned data providers deserve to be acknowledged.
The following people assisted in the preparation of this report:
Yu Cheng, ASA
Christine Dunnigan, FCIA, FSA
Sari Harrel, FCIA, FSA
Louis-Marie Pommainville, FCIA, FSA