Actuarial Report (17th) supplementing the Actuarial Report on the Old Age Security Program as at 31 December 2018

Alternative Formats

Document Properties

  • Type of Publication: Actuarial Report
  • Date: 8 September 2021

The Honourable Deb Schulte, P.C., M.P.
Minister of Seniors
House of Commons
Ottawa, Canada
K1A 0A6

Dear Minister:

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.

Yours sincerely,

Assia Billig, FCIA, FSA, PhD
Chief Actuary

Table of Contents

Appendices

List of Tables

1. Executive Summary

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.

1.1 Main Findings

  • Expenditures are projected to be respectively $1.2 billion and $2.6 billion higher in 2022 and 2023 than under the 16th OAS Program Actuarial Report.
  • Expenditures are projected to be $12.7 billion higher than under the 16th OAS Program Actuarial Report over the five-year period running from 2022 to 2026.
  • The projected number of OAS pensioners who will benefit from the increase is 3.2 million in 2022 and is expected to grow to 3.8 million by 2026.
  • Projected total program expenditures, expressed as a percentage of the Gross Domestic Product (GDP), are 2.80% in 2022 and 3.05% in 2026, or 0.05 and 0.11 percentage points higher, respectively, than under the 16th OAS Program Actuarial Report.

2. 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.”

3. Description of Division 31 of Part 4 of Bill C-30

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.

4. Financial Status

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.

4.1 Assumptions and Methods

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.

Table 1 - Illustrative Impact on OAS Basic Pension (July 2022 Basis)Table Footnote 1
Level of OAS Basic Pension as a Percentage of Maximum
Before
10% Increase
(%)		Annualized OAS Basic Pension
Before
10% Increase
($)		Annualized OAS Basic Pension
After
10% Increase
($)		Increase in
Annual OAS Basic Pension
($)(%)
25%1,9152,10719210%
50%3,8304,21338310%
75%5,7456,32057510%
100%7,6608,42676610%

Table 1 Footnotes

Table Footnote 1

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.

4.2 Results

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.

Table 2 - Financial Status before AmendmentsTable Footnote 1
Calendar YearNumber of Beneficiaries
(thousands)		Expenditures
($ million)		GDP
($ billion)		Expenditures
as a
Percentage
of GDP
OASGIS / AllowanceOASGIS / AllowanceAdmin.
Expenses		Total
20227,1372,50351,70416,30827268,2842,4862.75
20237,4062,60554,69917,25928872,2462,5872.79
20247,6732,70657,79418,22430476,3222,7002.83
20257,9452,80461,03019,19432180,5452,7942.88
20268,2182,90464,38720,20233884,9272,8902.94
20278,4823,00467,78421,23235689,3722,9902.99
20288,7493,10671,32522,30437594,0043,0943.04
20299,0073,20774,90223,39239398,6863,2013.08
20309,2443,28278,41824,376411103,2043,3123.12
204010,5873,630109,60932,383583142,5604,7003.03
205011,4493,609144,83039,101736184,6676,6672.77
206012,6653,514195,53146,933970243,4349,2552.63

Table 2 Footnotes

Table Footnote 1

16th OAS Program Actuarial Report as at 31 December 2018.

Return to table footnote 1

Table 3 - Financial Status of Amended Program
Calendar YearNumber of Beneficiaries
(thousands)		Expenditures
($ million)		GDP
($ billion)		Expenditures
as a
Percentage
of GDP
OASGIS / AllowanceOASGIS / AllowanceAdmin.
Expenses		Total
20227,1372,50352,85116,36827769,4962,4862.80
20237,4062,60557,15717,38829874,8432,5872.89
20247,6732,70660,41818,36231579,0942,7002.93
20257,9452,80463,82619,34133383,5002,7942.99
20268,2182,90467,36220,35935188,0722,8903.05
20278,4823,00470,94521,39936992,7132,9903.10
20288,7493,10674,68422,48238997,5553,0943.15
20299,0073,20778,48023,581408102,4693,2013.20
20309,2443,28282,22824,577427107,2313,3123.24
204010,5873,630116,09832,704595149,3974,7003.18
205011,4493,609153,34139,492771193,6046,6672.90
206012,6653,514206,63047,3761,016255,0219,2552.76
Table 4 - Impact of Amendments on Financial Status
Calendar YearNumber of Affected Beneficiaries
(thousands)		Difference in ExpendituresTable Footnote *
($ million)		GDP
($ billion)		Difference in Expenditures as a Percentage of GDPTable Footnote *
OASGIS / AllowanceOASGIS / AllowanceAdmin.
Expenses		Total
20223,1962161,1476051,2122,4860.05
20233,3592272,458129102,5972,5870.10
20243,5172382,624138112,7722,7000.10
20253,6762492,796147122,9552,7940.11
20263,8372602,975157133,1452,8900.11
20274,0002723,161167133,3412,9900.11
20284,1712853,359178143,5513,0940.11
20294,3522983,577190153,7833,2010.12
20304,5413093,810201164,0273,3120.12
20406,3084046,489321276,8374,7000.15
20506,7614028,511391368,9386,6670.13
20607,22237211,0984424611,5879,2550.13

Table 4 Footnotes

Table Footnote *

Differences between Tables 3 and 2.

Return to table footnote *

5. Conclusion

The 17th OAS Program Actuarial Report shows that:

  • Expenditures are projected to be respectively $1.2 billion and $2.6 billion higher in 2022 and 2023 than under the 16th OAS Program Actuarial Report.
  • Expenditures are projected to be $12.7 billion higher than under the 16th OAS Program Actuarial Report over the five-year period running from 2022 to 2026.
  • The projected number of OAS pensioners who will benefit from the increase is 3.2 million in 2022 and is expected to grow to 3.8 million by 2026.
  • Projected total program expenditures, expressed as a percentage of the Gross Domestic Product (GDP), are 2.80% in 2022 and 3.05% in 2026, or 0.05 and 0.11 percentage points higher, respectively, than under the 16th OAS Program Actuarial Report.

6. Actuarial Opinion

In our opinion, considering that this 17th 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 for the purposes of this report;
  • the assumptions used are, individually and in aggregate, reasonable and appropriate for the purposes of this report; and,
  • the methods employed are appropriate for the purposes of this report.

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
Senior Actuary

Ottawa, Canada
8 September 2021

Appendix A - Detailed Tables (Amended Program)

Table 5 - Beneficiaries (Projected) Table Footnote 1
Calendar YearNumber of BeneficiariesRecipient Rates
OAS
(thousands)		GIS
(thousands)		Allowance
(thousands)		OAS
(%)		GIS
(%)		Allowance
(%)
20196,3622,0527196.331.12.8
20206,6162,2149696.432.33.8
20216,8742,3069796.532.43.7
20227,1372,4069796.632.63.7
20237,4062,5079896.632.73.7
20247,6732,6079996.732.93.7
20257,9452,70410096.732.93.7
20268,2182,80310196.833.03.8
20278,4822,90210296.833.13.9
20288,7493,00410396.933.34.1
20299,0073,10510396.933.44.2
20309,2443,17910297.033.44.3
20319,4453,23810197.133.34.2
20329,6153,2909997.233.34.2
20339,7713,3379897.333.24.1
20349,9193,3799697.433.24.1
203510,0623,4209497.533.14.0
203610,1973,4559397.533.04.0
203710,3093,4849297.633.03.9
203810,4073,5079197.632.93.8
203910,4973,5269097.732.83.7
204010,5873,5418997.732.73.6
204110,6723,5408797.732.43.5
204210,7513,5448797.732.23.4
204310,8263,5448797.732.03.3
204410,9053,5438797.731.83.2
204510,9893,5428797.731.53.2
204611,0773,5398797.731.23.2
204711,1663,5358897.730.93.2
204811,2573,5308897.730.63.1
204911,3513,5248997.730.33.1
205011,4493,5199097.630.03.1
205511,9803,4419297.528.03.0
206012,6653,4199697.526.33.1

Table 5 Footnotes

Table 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 (TFSAs). All recipient rates include benefits paid outside Canada and for this reason can exceed 100%.

Return to table footnote 1

Table 6 - Expenditures and Average Annual Benefits (Projected)Table Footnote 1
Calendar YearExpenditures ($ million)Average Annual Benefit ($)
OASGISAllowanceAdministrative ExpensesTotalOASGISAllowance
201943,94512,90254723057,6246,9076,2877,706
202046,27013,69562824260,8356,9946,1876,526
202148,84214,67171225764,4827,1066,3617,376
202252,85115,63773127769,4967,4056,4997,532
202357,15716,63675229874,8437,7186,6367,680
202460,41817,58777431579,0947,8746,7457,818
202563,82618,54479733383,5008,0336,8587,941
202667,36219,54181835188,0728,1976,9718,064
202770,94520,56383636992,7138,3647,0868,191
202874,68421,62985338997,5558,5367,2018,313
202978,48022,715866408102,4698,7137,3168,440
203082,22823,702874427107,2318,8967,4558,557
203185,78724,601877445111,7109,0837,5978,706
203289,17925,455877462115,9739,2757,7378,841
203392,54926,290875479120,1939,4727,8798,979
203495,94927,121874496124,4409,6748,0259,117
203599,40427,954874513128,7459,8798,1759,255
2036102,87728,779875530133,06110,0898,3299,394
2037106,21529,568877547137,20710,3038,4879,542
2038109,48930,332880563141,26410,5218,6499,694
2039112,76231,077883579145,30110,7428,8149,848
2040116,09831,814890595149,39710,9668,98410,002
2041119,43132,488897611153,42711,1919,17710,292
2042122,76133,151907627157,44611,4199,35510,453
2043126,12833,802919643161,49211,6509,53710,618
2044129,62134,451933660165,66511,8879,72410,782
2045133,28335,111950677170,02112,1289,91410,944
2046137,07135,772969695174,50712,37410,10811,108
2047140,94236,428990713179,07312,62210,30511,274
2048144,93037,0851,011732183,75812,87510,50711,440
2049149,06137,7531,035751188,60013,13110,71211,607
2050153,34138,4331,059771193,60413,39410,92211,779
2055177,07241,8461,190880220,98814,78012,16112,940
2060206,63046,0461,3291,016255,02116,31413,47013,889

Table 6 Footnotes

Table 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 TFSAs. All expenditures include benefits paid outside of Canada.

Return to table footnote 1

Table 7 - Expenditures as a Percentage of GDP (Projected)
Calendar YearGross Domestic Product
($ billion)		Expenditures as % of Gross Domestic ProductTable Footnote 1
OASGISAllowanceAdministrative ExpensesTotal
20192,3041.910.560.020.012.50
20202,1932.110.620.030.012.77
20212,3572.070.620.030.012.74
20222,4862.130.630.030.012.80
20232,5872.210.640.030.012.89
20242,7002.240.650.030.012.93
20252,7942.280.660.030.012.99
20262,8902.330.680.030.013.05
20272,9902.370.690.030.013.10
20283,0942.410.700.030.013.15
20293,2012.450.710.030.013.20
20303,3122.480.720.030.013.24
20313,4292.500.720.030.013.26
20323,5522.510.720.020.013.27
20333,6792.520.710.020.013.27
20343,8122.520.710.020.013.26
20353,9502.520.710.020.013.26
20364,0872.520.700.020.013.26
20374,2312.510.700.020.013.24
20384,3822.500.690.020.013.22
20394,5392.480.680.020.013.20
20404,7002.470.680.020.013.18
20414,8692.450.670.020.013.15
20425,0442.430.660.020.013.12
20435,2272.410.650.020.013.09
20445,4162.390.640.020.013.06
20455,6102.380.630.020.013.03
20465,8092.360.620.020.013.00
20476,0162.340.610.020.012.98
20486,2282.330.600.020.012.95
20496,4452.310.590.020.012.93
20506,6672.300.580.020.012.90
20557,8702.250.530.020.012.81
20609,2552.230.500.010.012.76

Table 7 Footnotes

Table 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 TFSAs. All expenditures include benefits paid outside of Canada.

Return to table footnote 1

Appendix B - Acknowledgements

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
Kelly Moore
Louis-Marie Pommainville, FCIA, FSA

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