Actuarial Report (19th) on the Old Age Security Program as at 31 December 2024

1 Highlights of the report

Main findings 19th OAS Program Actuarial Report

Overall OAS program

• As a result of baby boomers gradually reaching age 65, the number of beneficiaries and expenditures are projected to steadily increase over the next decades.
• Expenditures are projected to increase from an estimated $92.6 billion in 2026 to $137.2 billion in 2035 and $277.7 billion by 2060.
• The cost ratio, which is represented as the ratio of OAS program expenditures to the Gross Domestic Product (GDP) is estimated to be 2.76% in 2026.
• Due to the population aging, the cost ratio is projected to reach a high of around 2.9% by the early 2030s. Afterward, this ratio is projected to gradually decrease to a level of 2.63% by 2060, mainly due to expected slower growth in inflation compared to the growth in GDP.

Uncertainty - 19th OAS Program Actuarial Report

Mortality assumption

The 19th OAS Program Actuarial Report is based on the assumption that mortality will continue to improve but at a slower pace than over the last few decades.

If longevity improves faster than assumed (projected life expectancies at age 65 in 2060 that are about 3.1 years higher), the cost ratio of expenditures to GDP in 2060 increases from 2.63% to 2.80%.

Economic growth

The 19th OAS Program Actuarial Report is based on the assumption of moderate and sustained economic growth.

If lower economic growth is assumed with total employment earnings in 2035 being 11% lower, this would result in:

• the cost ratio in 2060 increasing from 2.63% to 3.48%.

If higher economic growth is assumed with total employment earnings in 2035 being 16% higher, this would result in:

• the cost ratio in 2060 decreasing from 2.63% to 1.93%.

Scenario analysis - 19th OAS Program Actuarial Report

The 19th OAS Program Actuarial Report includes a section that uses scenario analysis to assess and illustrate relevant risks. The scenario presented is not meant to represent forecasts or predictions and should be interpreted with caution.

Acute economic event

The 19th OAS Program Actuarial Report is based on the assumption of sustained moderate economic growth.

A scenario was developed to illustrate the impact of an acute, relatively short-term economic event that unfolds over a period of 4 years starting in 2026. This scenario results in higher inflation and unemployment and lower growth in real wages. This hypothetical acute economic event scenario would result in:

• the cost ratio of expenditures to GDP in 2060 increasing from 2.63% to 2.88%.

2 Introduction

2.1 Purpose of the report

This is the 19th Actuarial Report on the Old Age Security (OAS) program since the implementation of the Old Age Security Act in 1952. The valuation date is 31 December 2024. This report has been prepared in compliance with the timing and information requirements of the Public Pensions Reporting Act, which provides that the Chief Actuary shall prepare a triennial actuarial report on the benefits under the various Parts of the Old Age Security Act, being as follows:

• Part I: OAS Basic Pension
• Part II: Guaranteed Income Supplement (GIS)
• Part III: Allowance

Another important purpose of the report is to inform the general public of the current and projected costs of the OAS program. The report provides information to evaluate the program's financial situation over a long period (until 2060), provided the program remains unchanged. Such information facilitates a better understanding of the program and the factors that influence its costs.

The previous triennial actuarial report was the 18th Actuarial Report on the Old Age Security Program as at 31 December 2021, which was tabled in the House of Commons on 3 November 2023. The next triennial report is scheduled as at 31 December 2027.

This 19th OAS Program Actuarial Report takes into account all amendments to date regarding the OAS program statute, with the most recent changes listed in the following section. It also takes into account recent demographic and economic experience data as described in section B.2 of Appendix B. Additionally, the report is based on the Chief Actuary's best-estimate assumptions, which consider various forecasts from experts in these areas.

This report presents projections of OAS program expenditures until the year 2060. Given the length of the projection period and the number of assumptions required, it is unlikely that actual future experience will develop precisely in accordance with the best-estimate projections.

2.2 Recent amendments

The Old Age Security Act was subject to an amendment after 31 December 2021 as follows:

• Under An Act to amend the Old Age Security Act (Guaranteed Income Supplement), which received Royal Assent on 3 March 2022, payments of the Canada Emergency Response Benefit and other COVID-19 pandemic-related assistance payments are excluded from a person's income for the purpose of determining GIS and Allowance benefits for any month after June 2022.

There was no supplementary actuarial report prepared regarding the above amendment as the effect on expenditures of the OAS program was deemed to be negligible. This amendment is taken into account for this 19th OAS Program Actuarial Report.

2.3 Subsequent events

For this 19th OAS Program Actuarial Report, there were no subsequent events, i.e. events which became known to the Chief Actuary after the valuation date, but before the report date, and that were deemed to have an effect on the expenditures of the OAS program as at the valuation date or during the projection period.

The Canadian and global economies are going through a period of heightened uncertainty, due in part to escalating trade tensions, environmental risks, and geopolitical conflicts. The future impacts of these issues and risks on expenditures of the OAS program are still uncertain and evolving, and as such, they have not been recognized as subsequent events for the purpose of this report.

2.4 Scope of the report

Section 3 presents a general overview of the methodology used in preparing the actuarial estimates included in this report, which are based on the best-estimate assumptions described in section 4. The results are presented in section 5 and include the projections of beneficiaries, expenditures, and cost ratios. Section 6 provides the reconciliation of the results with those of the 18th OAS Program Actuarial Report, and section 7 provides the actuarial opinion.

The various appendices provide a summary of the OAS program provisions, a description of the data, assumptions and methodology employed, detailed reconciliations of the results with the previous triennial report, the uncertainty of results, and detailed projections of beneficiaries and expenditures.

3 Methodology

The actuarial examination of the OAS program involves projections of its expenditures and cost measurement base (the Gross Domestic Product (GDP)) over a long period of time so that the future impacts of historical and projected trends in demographic and economic factors can be properly assessed. The actuarial estimates in this report are based on the provisions of the Old Age Security Act as at 31 December 2024, historical experience data used for the starting point of the projections, and best‑estimate assumptions regarding future demographic and economic experience.

Since the OAS program is financed from general tax revenues on a pay‑as‑you‑go basis, there is no need to project either contributions or investment earnings. However, projected GDP is used as a basis for measuring the relative costs over the projection period.

The costing begins with a projection of the general population of Canada. This requires assumptions regarding demographic factors such as fertility, migration, and mortality.

Expenditures consist of the benefits paid out and administrative expenses. Benefits are projected by applying assumptions regarding recipient rates for various types and levels of benefits to the projected population at the relevant ages, along with assumptions regarding increases in the maximum benefit rates. Administrative expenses are projected by considering the historical relationship between expenses and total benefit expenditures.

The GDP is projected using underlying assumptions of productivity, hours worked, and employment growth as determined in the Revised 32nd Actuarial Report on the Canada Pension Plan as at 31 December 2024, which was tabled in the House of Commons on 27 May 2026 (the Revised 32nd CPP Actuarial Report). By applying these expected increases to the last known GDP value in 2025, a projection of the GDP has been derived.

The assumptions and results presented in the following sections make it possible to measure the costs of the OAS program over the projection period. A wide variety of factors influence both the current and projected costs of the program. Accordingly, the results shown in this report differ from those shown in previous reports. Likewise, future actuarial examinations will likely reveal results that differ from the projections included in this report.

4 Best-estimate assumptions

4.1 Introduction

The information required by statute, which is presented in section 5 of this report, necessitates making numerous assumptions regarding future demographic and economic trends. The projections included in this report cover a long period of time (up to the year 2060).

The assumptions are determined by examining historical short- to long-term trends and applying judgement as to the extent these trends will continue in the future. These assumptions, which do not include any margins for adverse deviations, reflect the Chief Actuary's best judgment and are referred to in this report as the best-estimate assumptions. The use of best-estimate assumptions is considered to be the most appropriate choice for projecting the costs of the OAS program over the long term. The assumptions were selected to be independently reasonable and appropriate in the aggregate, taking into account certain interrelationships between them. To the extent applicable, the assumptions are consistent with the best-estimate assumptions used in the Revised 32nd CPP Actuarial Report.

For this 19th OAS Program Actuarial Report, there were no subsequent events, i.e. events which became known to the Chief Actuary after the valuation date, but before the report date, and that were deemed to have an effect on the expenditures of the OAS program as at the valuation date or during the projection period.

Table 1 and Table 2 present a summary of the most important assumptions used in this report compared with those used in the previous triennial report. The assumptions are described in more detail in Appendix B of this report.

4.2 Demographic assumptions

The population projection starts with the population of Canada on 1 July 2024, to which are applied fertility, migration, and mortality assumptions. The population projection is essential in determining the future number of OAS program beneficiaries.

The age distribution of the population has changed significantly over time. The proportion of the Canadian population aged 65 and above has increased from 7.6% in 1966 to 12.1% in 1996, and reached 18.9% in 2024, which indicates an aging population. It is assumed that this shift in the age distribution will continue in the future, although at a more moderate pace.

4.2.1 Fertility

One of the causes of the aging of the Canadian population is the decline in the total fertility rate that has occurred since the late 1950s. The total fertility rate in Canada decreased rapidly from a level of about 4.0 children per woman in the late 1950s to 1.6 by the mid-1980s. The total fertility rate then hovered between 1.5 and 1.7 until 2008. Similar to the experience in other industrialized countries, Canada's total fertility rate has decreased since 2008, with steeper decreases since 2020. Canada, once in the middle of the pack amongst industrialized countries, is now positioned with Italy and Japan as one of the countries with lower fertility rates. The total fertility rate for Canada stood at 1.41 in 2020 and decreased further to 1.26 in 2023.

The rapid decrease in the total fertility rate between the late 1950s and mid-1980s occurred as a result of changes in a variety of social, medical, economic, and environmental-related factors. It is unlikely that the rate will return to historical levels in the absence of significant societal changes. Decreases in the fertility rate since 2008 could be largely attributable to the 2008 economic downturn and continuing economic uncertainty. The housing crisis, the increase in the number of non-permanent residents, which tend to have lower fertility, as well as increased anxiety and mental health issues can also help explain the steep decreases in recent years.

To project the fertility rates in Canada for most age groups, a 20-year period of data ending in 2023 was used to establish a trending model that provides the best fit using historical patterns and anticipated future movements. Some adjustments were made for age groups 25-29 and 30-34. Fertility rates for certain age groups were also adjusted upwards to account for expected effects from the Canada-Wide Early Learning and Child Care Plan (CWELCC).

The assumed age-specific fertility rates lead to an assumed total fertility rate for Canada that will increase from its 2023 level of 1.26 children per woman to an ultimate level of 1.35 in 2033. It is assumed that the increase from 2023 levels will result from the positive impact of the CWELCC, as well as a renewed rise in fertility rates among the 30-39 age group, driven by the delayed childbearing decisions.

4.2.2 Mortality

Another element that has contributed to the aging of the population is the significant reduction in the age-specific mortality rates, especially at older ages. This can be measured by the increase in life expectancy at age 65, which directly affects how long retirement benefits will be paid to beneficiaries. Calendar year male life expectancy (without future mortality improvements at age 65 increased by 43% between 1966 and 2023, rising from 13.6 to 19.5 years. For women, it increased by 31%, from 16.9 to 22.2 years over the same period. Although the overall gains in life expectancy at age 65 since 1966 are similar for males and females, 67% of the increase occurred after 1991 for males, while for females, 47% of the increase occurred during that period.

Although Statistics Canada life tables were available up to 2023 at the time of the analysis, data for calendar years 2020 to 2023 were excluded for purposes of setting long-term mortality rates. Mortality tables for these years reflect significant mortality increases related to COVID-19 and opioid-related deaths, which are assumed to be temporary. Long-term future mortality rates are therefore determined by applying assumed mortality improvement rates to Statistics Canada's 2019 life tables. The projected mortality improvement rates are assumed to gradually reduce from their 15-year average ending in 2019 to ultimate levels in 2039, which are for both sexes 1.0% per year for ages below 90, 0.6% per year for ages 90 to 94, and 0.2% per year for ages 95 and above.

The assumed ultimate mortality improvement rates are based on an analysis of the Canadian experience over the period 1954 to 2019 and the possible drivers of future mortality improvements. Consideration was also given to benchmarks from peers as well as educational notes and research published by the Canadian Institute of Actuaries, including the most recent Mortality Improvements Research paper published in April 2024.

Short-term adjustments are then applied to projected mortality rates to match historical data available (2020 to 2023) and to reflect the temporary continuing impacts of the COVID-19 pandemic and opioid crisis. The COVID-19 pandemic is assumed to have a residual effect on mortality in 2024 and 2025, followed by an assumed full recovery and reversion to the projected unadjusted mortality rates for year 2026 and onward. The short-term adjustments also reflect the expectation that the opioid crisis will be temporary, and that mortality for affected age groups will revert to unadjusted mortality rates by 2039.

Considering the above, cohort life expectancy (with assumed future mortality improvements) at age 65 in 2025 is projected to be 21.6 years for males, and 24.1 years for females.

4.2.3 Net migration

Net migration corresponds to the number of immigrants less the net number of emigrants (i.e. the number of emigrants less the number of returning Canadians) plus the net increase in the number of non-permanent residents (NPR).

To select the assumptions regarding the short-term and ultimate rates, the components of net migration were analyzed separately by considering trends in the historical data as well as qualitative factors that could influence future trends. Consideration was also given to the federal government's short-term immigration targets and to long-term perspectives of various experts regarding levels of future immigration and NPR. For this valuation, a new methodology was developed to estimate the annual levels of NPR as a proportion of the population, from which the net increase in NPR is then derived.

In line with the government's short-term immigration targets, the immigration rate is expected to decrease from 1.12% of the population in 2024 to 0.96% in 2025, 0.92% in 2026, and 0.88% in 2027. After that, it is projected to gradually decrease to an ultimate rate of 0.82% by 2034. The ultimate rate of 0.82% corresponds to the 20-year average ending in 2024, which was selected to give some weight to generally higher levels of immigration observed since 2016 while still reflecting longer term historical trends.

The historical net emigration rate has been relatively stable. The net emigration rate is expected to decrease slightly from 0.12% of the population in 2024 to 0.11% by 2026 and remain at that level thereafter.

In recent years, there has been a significant increase in the number of NPR. By the end of 2024, the number of NPR reached an unprecedented level, representing 7.3% of the population. By contrast, based on the 20-year average ending in 2024, NPR represented 2.7% of the population. In addition, for the first time ever, the government announced short-term targets for NPR, which is set at 5% of the population by the end of 2026.

To address the higher levels and volatility of the number of NPR in recent years, a new method was developed for this report to project the number of NPR separately from the rest of the population. For this purpose, an assumption is made for each year of the projection period regarding the level of NPR as a percentage of the population. The resulting annual changes in NPR can then be determined and flow through the overall net migration rate.

Based on the new NPR method, the number of NPR as a percentage of the population is expected to decrease from 7.3% of the population in 2024 to 5% of the population by 2026 as per the government's short-term targets. It is further assumed that this proportion will decrease to 4% by 2035 and to an ultimate rate of 2.5% by 2050. The ultimate rate of 2.5% was selected to give some weight to recent higher levels of NPR, while still reflecting longer-term historical trends.

As a result of the above, the net migration rate for Canada, including net changes in the level of NPR, is projected to decrease from its 2024 level of 2.88% of the population^{Footnote 1} to −0.34% in 2025 and -0.29% in 2026, and is then assumed to increase to 0.82% in 2027. Thereafter, the net migration rate is assumed to gradually transition to an ultimate level of 0.72% of the population is 2051.

4.2.4 Population projections

Table 3 shows the population of Canada for three age groups (0-19, 20-64 and 65 and over) throughout the projection period. The ratio of the number of people aged 20-64 to those aged 65 and over is a measure that approximates the ratio of the number of working-age people to retirees. Because of the aging population, this ratio is projected to drop from 3.0 in 2025 to 2.1 by 2060.

The number of people reaching age 65 in any given year is a good indicator of the number of new basic pension beneficiaries coming into pay each year, which is expected to increase from 526,000 in 2025 to 627,000 by 2060.

4.3 Economic assumptions

The OAS program expenditures are presented as cost ratios using the GDP as a measurement base. This cost base is projected using economic assumptions regarding labour force participation rates, job creation rates, unemployment rates, and nominal increases in average employment earnings. For benefit projection purposes, assumptions regarding the rate of increase in prices and recipient rates for the various benefits are also required.

All economic assumptions are consistent with the Revised 32nd CPP Actuarial Report, which are based on the overall expectation of sustained moderate economic growth.

A key element underlying the best-estimate economic assumptions relates to the continued trend toward longer working lives. Older workers are expected to exit the workforce at a later age, which could alleviate the impact of the aging of the population on future labour force growth. However, despite the expected later exit ages, labour force growth is projected to weaken as the working-age population expands at a slower pace and baby boomers continue to exit the labour force.

4.3.1 Labour force

Employment levels vary with the rate of unemployment and reflect trends in increased workforce participation by women, longer periods of formal education among young adults, changes in the age structure of the working-age population, as well as changing retirement patterns of older workers.

As the population ages, older age groups with lower labour force participation increase in size. As a result, the labour force participation rate for Canadians aged 15 and over is expected to decline from an estimated value of 65.2% in 2025 to 64.4% in 2035. A more useful measure of the working-age population is the participation rate of those aged 18 to 69, which is expected to increase from an estimated 77.3% in 2025 to 80.0% in 2035. The increase in the participation rate for those aged 18 to 69 reflects several trends.

For example, it is assumed that female participation rates will continue to grow at a faster pace than male participation rates until 2035, thereby continuing to reduce the gap in participation rates between males and females, albeit at a slower pace than in the past. A part of this projected reduction can be attributed to the continuing impact of the Canada-Wide Early Learning and Child Care plan on female labour force participation.

It is also assumed that participation rates for age groups 55 and over for both sexes will increase as a result of an expected continued trend toward longer working lives.

It is expected that the projected aging of the population will create upward pressure on future participation rates as a larger proportion of the population no longer in the workforce will require services from a relatively smaller working-aged population. The participation rates for all age groups are thus expected to increase in response to this demographic shift.

Overall, the male participation rate of those aged 18 to 69 is expected to be 81.0% in 2025 and to increase to 83.1% by 2035, while the female participation rate for the same age group is expected to be 73.5% in 2025 and to increase to 76.9% by 2035. As such, the difference between male and female participation rates for the age group 18 to 69 is projected to be 7.5% in 2025 and decrease to 6.2% by 2035. Thereafter, the gap between participation rates for males and females, age group 18 to 69, is projected to vary between 6.1 and 6.2 percentage points.

The job creation rate, measured by the annual change in employment, was on average 1.6% from 1976 to 2024. Future job creation rates will depend on changes in the unemployment rates and the rate of labour force growth.

The unemployment rate (ages 15+) is projected to rise from 6.3% in 2024 to 7.0% in 2025, and then gradually decline to 6.1% by 2028.

In 2025 and 2026, the labour force is expected to contract mainly due to a decline in the NPR population. This will contribute to negative job creation during those years. Stronger job creation rates are expected in 2027 and 2028 at rates of 1.2% and 1.0%, respectively, as labour force growth resumes and unemployment falls. Starting in 2029, job creation rates are assumed to align with labour force growth, averaging 0.8% annually until 2035 and 0.4% thereafter. The aging population is the primary factor behind this slower long-term growth.

4.3.2 Price increases

On December 13, 2021, the Bank of Canada and the federal Government renewed their commitment to keep inflation between 1% and 3% with a target at the mid-point of 2% until the end of 2026. They further noted that the Bank of Canada will use the flexibility of the 1% to 3% range to actively seek the maximum sustainable level of employment to an extent that is consistent with keeping medium-term inflation expectations at 2%.

Despite the mid-point target of 2%, price increases (inflation), as measured by changes in the Consumer Price Index (CPI), will fluctuate from year to year. For instance, global imbalances in supply and demand during the COVID-19 outbreak, pent-up demand following the lifting of restrictions in 2021 and 2022, as well as the war in Ukraine that commenced in February 2022, contributed to upward pressure on prices, resulting in inflation peaking at 8.1% in June 2022. As the pandemic became more manageable, fiscal stimulus wound down. This, combined with demand and supply returning to equilibrium, allowed the inflation rate to gradually align with the Bank's 2% target, which it hit in August 2024. On an annual basis, the average inflation rate in 2024 was 2.4%. In 2025, the inflation rate had largely stabilized near the Bank's target. Although energy prices increased in early 2026 due to the conflict in the Middle East, inflation remained within the Bank of Canada's 1–3 per cent target range.

In this report, the inflation rate in Canada is assumed to be 2.2% in 2025, decreasing to 2.1% in 2026 and returning to the 2.0% target for 2027 and thereafter. These assumed price increases are based on short-term forecasts from various economists as well as the expectation that the Bank of Canada and federal Government will continue to renew the inflation target of 2.0%, and that the Bank of Canada will be successful in keeping inflation at its mid-point target in the long term.

4.3.3 Gross Domestic Product

The long-term GDP is projected using underlying assumptions of productivity, hours worked, and employment growth as determined in the Revised 32nd CPP Actuarial Report. The short-term GDP projection is informed by the 2025 Canadian federal budget. The resulting real GDP growth assumption is shown in Table 4.

4.3.4 Real wage increases

Wage increases affect the financial balance of the OAS program in two ways. In the short term, an increase in the average wage translates into higher GDP, with little immediate impact on benefits. Therefore, costs in relation to this measurement will decrease. Over the longer term, higher average wages in relation to the level of prices could be expected to produce lower payouts for income-tested benefits such as the GIS and Allowance. The difference between nominal wage increases and inflation represents increases in the real wage, which is also referred to in this report as the real wage increase.

Two wage measures are used in this report: the average annual earnings (AAE) and the average weekly earnings (AWE). The assumed increase in AAE is used to project the income of future beneficiaries, while the assumed increase in the AWE is used to project the increase in the Year's Maximum Pensionable Earnings (YMPE) from one year to the next. The two measures are assumed to grow at the same pace over the projection period.

Real AAE and real AWE are projected to increase by 0.8% in 2025 and for every year thereafter. This assumption is developed taking into account historical trends and future views on labour productivity, average hours worked and other contributing factors. The ultimate real AAE and real AWE increase assumption combined with the ultimate price increase assumption results in an assumed increase in nominal AAE and nominal AWE of 2.8% in 2027 and thereafter.

Table 4 summarizes the main economic assumptions over the projection period.

4.3.5 Recipient rates

OAS recipient rates represent the proportion of the Canadian population that has received (historically), receives, or is projected to receive OAS program benefits. Recipient rates are different than coverage or eligibility rates for benefits, which are higher, since individuals upon becoming eligible for benefits don't necessarily apply for them immediately, but may rather defer application and commencement of their benefits (for reasons such as to receive increased benefits for voluntary deferrals or to increase benefits from partial to full amounts by accruing more years of residence).

Recipient rates for the OAS basic pension presented in this report exclude the impact of the OAS Recovery Tax. The impact of the OAS Recovery Tax on the basic pension recipient rates is discussed in section 5 of Appendix B of this report.

Similar to the previous OAS report, the predominant trend observed for this current report remains an increase in the number of beneficiaries deferring commencement of their OAS basic pension. As shown in Table 5, the overall basic pension recipient rates for males and females are projected to slightly increase from 93.5% in 2025 to 94.7% in 2060 for males and from 94.9% to 95.6% for females over the same period. The rates for both sexes increase over time primarily due to the aging of the population.

Historical OAS recipient rates by age and sex over the 10 years ending in 2024 were used as the starting point for determining the corresponding best-estimate assumptions.

GIS and Allowance recipient rates by age, sex, type and level of benefit for year 2024 were used as the starting point for determining the corresponding best-estimate assumptions.

GIS and Allowance recipient rates are projected under the assumption that initial retirement income increases in line with the rate of wage growth, where such retirement income mainly comprises CPP and Quebec Pension Plan (QPP) benefits (including additional CPP and QPP benefits). At the same time, it is assumed that the income limits for the GIS and Allowance will have increased in line with inflation prior to retirement. Together, this would normally result in a lower proportion of new retirees becoming eligible for these benefits over the projection period. However, the effect of income from Tax-Free Savings Accounts (TFSAs) being excluded for GIS and Allowance benefits is projected to partially offset the expected decline in recipient rates for these benefits.

Table 5 presents a summary of the projected recipient rates by type of benefit.

5 Results

5.1 Overview

The key observations and findings of this report are described below.

• Demographic changes, notably the aging of the Canadian population, will have a major impact on the ratio of the number of people aged 20 to 64 to those aged 65 and over. This ratio is projected to fall from about 2.9 in 2026 to 2.1 in 2060.
• The number of beneficiaries of the OAS basic pension is projected to increase at a higher pace from 2026 to 2035, growing from an estimated 7.9 million in 2026 to 9.7 million by 2035, mainly due to the continuing retirement of the baby boom generation reaching age 65 over that period. Thereafter, the growth in the number of beneficiaries is projected to be lower. By 2060, the number of OAS basic pension beneficiaries is projected to reach 12.4 million.
• OAS basic pension annual expenditures are projected to increase from an estimated $70.7 billion in 2026 to $105.8 billion in 2035 and $223.4 billion by 2060.
• The number of GIS and Allowance beneficiaries is projected to increase at a higher pace from 2026 to 2035, growing from an estimated 2.7 million in 2026 to 3.4 million by 2035. The GIS recipient rate (i.e., the proportion of the Canadian population that has received, receives, or is projected to receive the GIS) is projected to slowly increase from 31.9% in 2026 to 32.5% in 2035 and to then slowly decrease to 26.9% by 2060.
• GIS and Allowance annual expenditures are projected to increase from an estimated $21.3 billion in 2026 to $30.7 billion in 2035 and $52.9 billion by 2060.
• Total annual OAS program expenditures (including administrative expenses) are projected to increase from an estimated $92.6 billion in 2026 to $137.2 billion in 2035 and $277.7 billion by 2060.
• The cost ratio of expenditures to GDP is projected to be 2.69% in 2025 and 2.76% in 2026. Thereafter, as shown in Chart 1, this ratio is projected to reach a high of around 2.9% between 2031 and 2036 due to the retirement of the baby boomers. After 2036, the ratio of expenditures to GDP is projected to gradually decrease to a level of 2.63% by the late 2050s, which is comparable to the historical levels of the early 1990s. This reduction is mainly attributable to expected slower growth in inflation compared to growth in wages and GDP and increases in additional CPP and QPP benefits.

Over time, price indexation of benefits that increases more slowly than the rate of growth in average employment earnings means that benefits will replace a decreasing share of an individual's pre-retirement earnings. One of the sensitivity tests shown in Appendix D of this report provides an indication of the impact on projected results if benefit rates were increased to partially reflect the growth in real wages.

Chart 1 - Text version

Expenditures as a Proportion of GDP (Historical)

Calendar Year	Proportion of GDP
1970	2.03%
1971	2.11%
1972	2.17%
1973	2.15%
1974	2.12%
1975	2.14%
1976	2.12%
1977	2.09%
1978	2.11%
1979	2.15%
1980	2.21%
1981	2.26%
1982	2.43%
1983	2.44%
1984	2.42%
1985	2.47%
1986	2.52%
1987	2.47%
1988	2.40%
1989	2.38%
1990	2.44%
1991	2.59%
1992	2.65%
1993	2.65%
1994	2.59%
1995	2.52%
1996	2.51%
1997	2.44%
1998	2.42%
1999	2.31%
2000	2.18%
2001	2.20%
2002	2.20%
2003	2.19%
2004	2.13%
2005	2.08%
2006	2.08%
2007	2.07%
2008	2.05%
2009	2.26%
2010	2.19%
2011	2.18%
2012	2.25%
2013	2.26%
2014	2.24%
2015	2.37%
2016	2.43%
2017	2.43%
2018	2.45%
2019	2.49%
2020	2.73%
2021	2.48%
2022	2.44%
2023	2.64%
2024	2.67%

Expenditures as a Proportion of GDP (Projected)

Calendar Year	Proportion of GDP
2025	2.68%
2026	2.74%
2027	2.78%
2028	2.82%
2029	2.85%
2030	2.89%
2031	2.91%
2032	2.91%
2033	2.92%
2034	2.92%
2035	2.92%
2036	2.92%
2037	2.92%
2038	2.91%
2039	2.90%
2040	2.88%
2041	2.87%
2042	2.85%
2043	2.83%
2044	2.81%
2045	2.79%
2046	2.77%
2047	2.76%
2048	2.74%
2049	2.72%
2050	2.71%
2051	2.69%
2052	2.68%
2053	2.66%
2054	2.65%
2055	2.64%
2056	2.64%
2057	2.63%
2058	2.62%
2059	2.62%
2060	2.62%

5.2 Number of beneficiaries

Table 6 and Table 7 present the historical and projected number of beneficiaries along with the respective overall recipient rates. The projected number of beneficiaries is derived from the product of the projected population and the relevant assumed recipient rates, which vary by year, age, sex, and type and level of benefit. Beneficiaries include those who receive benefits outside Canada.

The recipient rates shown in Table 7 reflect the eligible ages for program benefits, that is age 65 and over for the OAS basic pension and GIS, and ages 60 to 64 for the Allowance benefit. The OAS and GIS recipient rates also account for voluntary deferrals, which became effective 1 July 2013. The OAS basic pension recipient rates and number of beneficiaries shown in Table 6 and Table 7 are on a gross basis; that is, they have not been adjusted to account for the application of the OAS Recovery Tax, which is a provision of the Income Tax Act.

The OAS Recovery Tax, which applies to high-income pensioners, effectively reduces recipient rates, since very high-income pensioners may have their benefit completely reduced. In 2026, it is projected that 8.2% (or 646,000) of all OAS pensioners will be subject to the Recovery Tax, including 2.7% (213,000) whose OAS pensions are completely reduced. In 2060, it is projected that 10.5% (1.30 million) of all OAS pensioners will be subject to the Recovery Tax, including 3.5% (434,000) whose OAS pensions are completely reduced. Section 5 of Appendix B presents more detailed information on the projected impacts of the OAS Recovery Tax on the number of OAS basic pension beneficiaries and total amounts payable.

As shown in Table 7, the number of OAS pensioners is expected to increase at a higher pace from 2026 to 2035, growing from 7.9 million in 2026 to 9.7 million by the end of 2035. After 2035, due to the relative stability in the growth of the population aged 65 and over and in the basic pension recipient rates, the number of beneficiaries is expected to continue to increase but at a slower pace to reach 12.4 million by 2060.

The number of GIS beneficiaries is projected to increase at a higher pace from 2026 to 2035, growing from 2.7 million in 2026 to 3.3 million by 2035. Over that period, the increase in the number of basic pension and GIS beneficiaries is mainly a result of the aging of the population and the retirement of the baby boomers.

To determine whether an individual is eligible for the GIS or Allowance, retirement income from sources such as a Registered Retirement Savings Plan (RRSP), locked-in RRSP, and base and additional CPP and QPP benefits is compared to the GIS and Allowance income thresholds. Since these thresholds are indexed to inflation while CPP and QPP benefits are projected in line with wage growth before retirement, GIS and Allowance eligibility tends to decrease over time. However, throughout the projection period, it is assumed that the increased usage of TFSAs will have the opposite effect on eligibility.

The number of Allowance beneficiaries is projected to slightly increase over the period 2026 to 2030, going from an estimated 70,000 in 2026 to 71,000 by 2030, with the recipient rates slightly increasing from 2.6% to 3.0% over the same period. After 2030, the Allowance recipient rate stabilizes before slowly decreasing. In 2060, the Allowance recipient rate is expected to be 2.2%.

5.3 Expenditures and average annual benefits

The historical and projected expenditures and average annual benefits by type are presented in Table 8 and Table 9. The amounts of OAS basic pension benefits presented in Table 8 and Table 9 do not account for the OAS Recovery Tax in the determination of benefits. The OAS Recovery Tax reduces the OAS basic pension by 15 cents for each dollar of income above a minimum threshold. It is estimated that in 2026 approximately 8.2% (or 646,000) of all OAS pensioners will be affected by the Recovery Tax, resulting in the repayment of about $3.3 billion or 4.6% of the total amount of basic pensions payable. Section 5 of Appendix B presents more detailed information on the projected impact of the OAS Recovery Tax on the basic pensions payable.

Total OAS basic pension expenditures are projected to increase from $70.7 billion in 2026 to $105.8 billion by 2035 and $223.4 billion by 2060. The projected average annual basic pension for beneficiaries aged 65 to 74 of $8,609 in 2026 is equal to about 95.6% of the projected maximum annual OAS pension at age 65 for 2026. The projected average annual basic pension for beneficiaries aged 75 and older of $9,210 in 2026 is equal to about 93.0% of the projected maximum annual OAS pension at age 75 for 2026. The OAS basic pension expenditures and average benefits account for voluntary deferrals, which became effective 1 July 2013, and the 10% increase in the pension payable to beneficiaries aged 75 and older, effective 1 July 2022.

The amounts of GIS and Allowance expenditures presented in Table 9 account for additional CPP and QPP benefits. For each benefit, total expenditures are the product of the number of beneficiaries and respective average benefit by age, sex, and type and level of benefit.

Total GIS expenditures are projected to increase from $20.7 billion in 2026 to $30.1 billion by 2035 and $52.1 billion by 2060. The projected average annual GIS benefit is $7,749 in 2026, which is about 58% of the projected maximum annual GIS single rate for 2026. In the long term, the interaction of TFSAs and additional CPP and QPP benefits results in the average GIS benefit slightly decreasing to about 56% of the maximum GIS single rate by the end of the projection period.

Total Allowance expenditures are projected to increase from $611 million in 2026 to $629 million by 2035 and $864 million by 2060. The projected overall average annual Allowance benefit is $8,696 in 2026, which is about 51% of the projected maximum regular annual benefit for 2026. The interaction of TFSAs and additional CPP and QPP benefits results in the average Allowance benefit decreasing to about 38% of the maximum Allowance regular rate by the end of the projection period.

Projected total annual OAS program expenditures for all benefits and administrative expenses are $92.6 billion in 2026, rising to $137.2 billion in 2035 and $277.7 billion by 2060. OAS basic pension benefits are projected to be 76% of total expenditures in 2026, and this proportion is expected to increase to 80% by 2060.

5.4 Cost ratios

Since the program is financed from general revenues on a pay-as-you-go basis, it is useful to express its annual expenditures in relative terms rather than in absolute dollar terms. For this reason, the expenditures are presented as cost ratios using GDP as a measurement basis.

The GDP is projected using underlying assumptions of productivity, hours worked, and employment growth as projected under the Revised 32nd CPP Actuarial Report as at 31 December 2024. Table 10 and Table 11 present the historical and projected annual expenditures as a percentage of GDP.

The cost ratio of OAS program expenditures to GDP is projected to be 2.69% in 2025 and 2.76% in 2026. The retirement of the baby boomers is projected to increase the expenditures of the program, and the ratio is projected to reach a high of 2.9% during the 2030s. Thereafter, although the impacts of TFSAs reduce the amount of income for benefit calculation purposes and tend to increase this ratio over the long term, the growth in additional CPP and QPP benefits and the fact that OAS benefits are indexed to inflation as opposed to wages drive down the cost of the OAS program relative to the GDP over the long term. As a result, annual expenditures are expected to gradually fall to 2.63% of GDP by the late 2050s, which is comparable to the historical levels of the early 1990s.

The projected expenditures shown in Table 11 reflect the eligible ages for program benefits, that is, age 65 and over for the OAS basic pension and GIS, and ages 60 to 64 for the Allowance benefit. The OAS and GIS expenditures also account for voluntary deferrals, which became effective 1 July 2013, and the 10% increase in the OAS pension in July 2022 for beneficiaries aged 75 and older.

6 Reconciliation with previous triennial report

6.1 Introduction

The results presented in this report differ from those presented in the previous triennial report, the 18th Actuarial Report on the OAS program as at 31 December 2021, for a variety of reasons. Differences between the actual experience from 2022 through 2024 and that projected in the 18th Actuarial Report on the OAS program are addressed in subsection 6.2 below. Since historical results provide the starting point for the projections shown in this report, these historical differences between actual and projected experience have an effect on the projections. Detailed reconciliations of the projected expenditures are presented in Appendix C.

6.2 Experience update – 2022 to 2024

The components of change in the program expenditures from 31 December 2021 to 31 December 2024 are summarized in Table 12.

OAS basic pension expenditures during the period were $648 million lower than projected. For the most part, this is because there were about 1.2% fewer beneficiaries due to higher deferrals than expected. GIS expenditures were $1,005 million higher than projected and Allowance expenditures were $64 million higher than projected. Administrative expenses were $386 million higher than expected over the period.

6.3 Changes in expenditures as a percentage of the GDP

Table 13 presents the main elements of all changes in the expenditures expressed as a percentage of the GDP since the 18th Actuarial Report on the OAS program.

The main methodology changes were related to improvements in modeling NPR, which had the effect of decreasing the cost ratio over the long term. The experience update over the period 2022 to 2024 had the impact of increasing both the projected expenditures because of higher inflation and the GDP, which resulted in a net decrease in the cost ratio. The combined changes in demographic assumptions decreased the cost ratio mainly due to migration, but this effect was counterbalanced in the long term by a decrease in the fertility rates. The combined changes in economic assumptions resulted in the decrease of the projected GDP, and therefore the increase in the cost ratio, mainly due to lower real wage growth.

Overall, the update in experience and changes in all assumptions lead to lower cost ratios for most of the projection period compared to the previous 18th Actuarial Report on the OAS program. In 2030, the cost ratio is 2.90% compared to 2.98% under the previous actuarial report. By 2060, the cost ratio stays stable and is projected to 2.63% compared to 2.64% under the previous actuarial report.

6.4 Changes in expenditures

Table 14 presents the main elements of all changes in the expenditures since the 18th Actuarial Report on the OAS program.

Changes related to improvements in the methodology used to model NPR led to a decrease in expenditures. The net impact of all changes in the expenditures is minor, and the projected expenditures in this report are similar to the expenditures projected under the 18th Actuarial Report on the OAS program.

7 Actuarial opinion

In our opinion, considering that this 19th Actuarial Report on the Old Age Security program as at 31 December 2024 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 opinions given, in accordance with accepted actuarial practice in Canada, in particular, the General Standards 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 actuarial review of the OAS program as at 31 December 2024.

Assia Billig, FCIA, FSA 
Chief Actuary

Laurence Frappier, FCIA, FSA
Senior Actuary

François Boulé, FCIA, FSA 
Senior Actuary

Jean-François Lussier, FCIA, FSA
Senior Actuary

Ottawa, Canada

25 June 2026

Appendix A — Summary of program provisions

A.1 Introduction

The Old Age Security Act came into force on 1 January 1952. Benefits provided under the Old Age Security Act include the basic pension, the Guaranteed Income Supplement, and the Allowance, which started being paid in 1952, 1967, and 1975, respectively. The Allowance for the survivor benefit started in 1985.

Since the inception of the Old Age Security program, the Old Age Security Act has been amended several times. The Old Age Security Act was most recently amended by An Act to amend the Old Age Security Act (Guaranteed Income Supplement) (Bill C-12), which received Royal Assent on 3 March 2022.

Bill C-12 amended the Old Age Security Act to exclude Canada Emergency Response Benefits and other COVID-19 pandemic-related assistance payments from a person's income when determining the amount of GIS or Allowance benefits for any month after June 2022.

This Appendix A is meant only to provide a summary of the provisions of the OAS program. The legislation shall prevail if there is any discrepancy between it and this summary.

A.2 Financing

All benefits provided under the Old Age Security Act are financed on a pay-as-you go basis and paid out of the Consolidated Revenue Fund.

A.3 Basic pension

The OAS basic pension is a monthly benefit available, on application, to anyone age 65 or over who meets the residence and legal status requirements specified in the Old Age Security Act.

A.3.1 Eligibility conditions

To qualify for an OAS basic pension, a person must be 65 years of age or older, and

• must be a Canadian citizen or a legal resident of Canada on the day preceding the approval of their application; or
• if the person no longer lives in Canada, must have been a Canadian citizen or a legal resident of Canada on the day preceding the day they stopped living in Canada.

To qualify for an OAS basic pension payable in Canada, an individual must have resided in Canada for at least 10 years after age 18. To receive the OAS pension while living outside Canada, at least 20 years of residence in Canada after age 18 is required. International social security agreements may help individuals meet these residence requirements. As of 1 January 2011, the OAS basic pension is not payable to incarcerated individuals, in accordance with the provisions of the Eliminating Entitlements for Prisoners Act.

A.3.2 Amount of benefits

The amount of a person's pension is determined by their age and the total length of time they have lived in Canada, according to the following rules:

• The OAS pension payable to a person aged 75 or older is increased by 10%.
• A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years may qualify for a full OAS pension.
• A person who has not lived in Canada for 40 years after reaching age 18 may still qualify for a full pension if, on 1 July 1977, he or she was 25 years of age or over, and
  • lived in Canada on that date, or
  • had lived in Canada before that date and after reaching age 18, or
  • possessed a valid immigration visa on that date.

In such cases, the individual must have lived in Canada for the 10 years immediately prior to the approval of the application for the pension. Absences during this 10-year period may be offset if, after reaching age 18, the applicant was present in Canada before those 10 years for a total period that was at least three times the length of absence. In this instance, however, the applicant must also have lived in Canada for at least one year immediately prior to the date of the approval of the application.

• A person who cannot meet the requirements for the full OAS pension may qualify for a partial pension. A partial pension is earned at the rate of 1/40th of the full monthly pension for each complete year of residence in Canada after reaching age 18. Once a partial pension has been approved, it may not be increased as a result of additional years of residence in Canada.

Effective 1 July 2013, individuals may opt to defer receiving the OAS basic pension by up to five years after the eligible age (i.e., age 65 or older for those meeting the minimum residency requirement after age 65) in exchange for a higher pension. The deferred pensions are increased by 0.6% for each month after the eligible age until the month in which the application for the pension is approved (the deferral period) but in no case later than age 70. For those eligible for a basic pension at age 65, the maximum pension adjustment is 36% at age 70. In the case where an individual, who is entitled to a partial pension, chooses to defer receipt of the pension, the pension amount paid is the greater of the increased pension over the individual's deferral period and the higher pension resulting from accruing additional years of residency over that period.

The OAS basic pension is subject to income tax. The amount of the pension paid to persons with high incomes is also reduced through a provision of the Income Tax Act often referred to as the "OAS Recovery Tax". For this purpose, an individual's total net annual income is after pension income splitting, if that option is elected by OAS beneficiaries who are married or common-law partners.

OAS Recovery Tax deductions are withheld at source. The deductions are estimates of the tax owed and are recalculated in July of each year based on the OAS recipient's previous year's net income. The Recovery Tax actually owed for a given year is determined the following year and compared to the deductions made, with the given year's tax liability adjusted accordingly.

The income threshold for the Recovery Tax is indexed upward in accordance with increases in the CPI. For every dollar of income above this limit, the amount of the basic pension is reduced by 15 cents. Income earned within a TFSA or withdrawals made from a TFSA are excluded from total net annual income for the purpose of determining the amount of the OAS Recovery Tax, which could then result in a higher basic pension payable.

A.4 Guaranteed Income Supplement

The GIS is a monthly benefit paid to residents of Canada who receive an OAS basic pension (either the full amount or a partial amount) and who have little or no other income.

Payment of the GIS may begin in the same month as payment of the basic pension. The amount of the benefit varies according to income (see below). Most individuals receiving the GIS can continue to do so by filing their income tax returns, rather than making a new application each year. The amount of monthly payments may increase or decrease according to reported changes in a person's yearly income. Any income earned within a TFSA or withdrawals made from a TFSA are not considered as income for the purpose of determining the level of GIS benefit entitlement.

Unlike the OAS basic pension, the GIS is not subject to income tax. The GIS is not payable outside Canada beyond a period of six months following the month of departure from Canada, regardless of how long the person previously lived in Canada.

A.4.1 Eligibility conditions

To receive the GIS, a person must be receiving an OAS basic pension. Eligibility for the GIS is determined every year based on the previous year's income. Income (as defined for purposes of the GIS and Allowance benefits under the Old Age Security Act) received in the previous year is used to calculate the amount of benefits paid during the period starting on 1 July of a calendar year and ending on 30 June of the following calendar year.

In general, income as defined under the Income Tax Act is included subject to certain exemptions. Exemptions from income include any payments received under the OAS program (basic pension, GIS, and Allowance benefits), the first $5,000 of employment or self-employment income and 50% of employment or self-employment income between $5,000 and $15,000. In combination, the full and partial employment income exemption can result in a maximum total employment income exemption of $10,000.

The resulting estimated income of an individual (or, the combined income of the individual and their spouse or common-law partner) cannot exceed certain limits.

Persons admitted to Canada as sponsored immigrants after 6 March 1996 and qualifying for benefits after January 2001 are not eligible, generally speaking, to receive the GIS for the duration of a sponsorship, up to a maximum of ten years. Exceptions are made, however, if an immigrant's sponsor dies, is incarcerated for a period of more than six months, is convicted of a criminal offence relating to the sponsored individual, or undergoes personal bankruptcy.

A spouse or common-law partner who becomes involuntarily separated due to, for example, incarceration or institutionalization of their spouse or partner, is considered to be single in regard to applying for the GIS benefit.

Since a person may only receive the GIS if also in receipt of the OAS basic pension, the GIS is not payable to incarcerated individuals as per the provisions of the Eliminating Entitlements for Prisoners Act.

A.4.2 Amount of benefits

The amount of the GIS to which a person is entitled depends on their length of residence in Canada, marital status, and income. If the person is married or living in a common‑law relationship, the combined income of the person and their spouse or common-law partner is taken into consideration when the amount of the GIS benefit is calculated.

To be entitled to a full GIS benefit, applicants must have resided in Canada for at least 10 years after reaching age 18. For applicants who are admitted to Canada after 6 March 1996 and qualify for OAS benefits after January 2001, and who have less than 10 years of residence in Canada after age 18, a partial benefit is payable provided, as noted in the previous section, that the person is not a sponsored immigrant who is still in the period of sponsorship. The partial benefit is calculated at the rate of 1/10th of the amount of the full benefit for each complete year of residence in Canada after age 18. The proportion payable is recalculated each year, taking into account additional residence in Canada during the previous year, building gradually to a full benefit after 10 years.

There are two rates of payment for a GIS benefit. The single rate applies to single individuals – including widowed, divorced or separated persons as well as individuals who have never been married and to persons for whom their spouses or common-law partners do not receive either the OAS pension or the Allowance. The single rate also applies to spouses or common-law partners who become involuntarily separated from their spouses or partners as mentioned above.

The married rate applies both to married couples and to couples living in common‑law relationships, where either both spouses are OAS pensioners or where one spouse is eligible for the Allowance benefit.

The single rate is higher than the married rate, reflecting the higher cost of living alone. However, each member of a married or common-law couple is entitled to their own benefit, so the combined benefits for a couple are higher than those for a single person.

As of 1 July 2011, top-up benefits are payable to GIS recipients who receive benefits at the single rate, as described above, and to couples that include a GIS recipient. The top-ups are reduced by 25 cents for every dollar of income in excess of $2,000 for GIS single recipients and $4,000 of combined income for couples.

A special provision applies to persons who receive a partial OAS pension. In this case, the supplement is increased by the difference between the maximum OAS pension and the partial OAS pension in order to provide the same combined monthly pension and supplement to beneficiaries with the same level of income. The additional amount may result in the supplement exceeding the maximum GIS payable.

For a single, widowed, divorced or separated person, the maximum monthly GIS benefit is reduced by 50 cents for every dollar of monthly income (i.e., annual income divided by 12). This reduction is in addition to any reduction to the top-up.

If both spouses or common-law partners are receiving the OAS basic pension, the maximum monthly GIS of each person is reduced by 25 cents for every dollar of other combined monthly income, which is in addition to any reduction applied to the top-up.

A special provision applies in the case of a couple in which only one spouse or common-law partner is a pensioner, and the other is not eligible for either the OAS pension or the Allowance. In this instance, the pensioner can receive the GIS at the higher rate paid to those who are single. Moreover, the maximum monthly GIS is reduced by 25 cents for every dollar of the couple's combined monthly income, and the reduction of 25 cents is applied only when the combined monthly income of the couple exceeds the maximum monthly OAS pension, where that amount, if not a multiple of $4, is rounded to the next higher multiple of $4. This reduction is in addition to any reduction applied to the top-up benefit.

In the case of a couple in which one spouse or common-law partner receives the GIS and the other receives the Allowance, the GIS is paid at the rate paid to those who are married, and the maximum monthly GIS is reduced by 25 cents for every dollar of the couple's combined monthly income. The reduction of 25 cents is applied only when the combined monthly income of the couple exceeds four-thirds times the maximum monthly OAS pension, where that pension, if not a multiple of $3, is rounded to the next higher multiple of $3. This reduction is in addition to any reduction applied to the top-up.

GIS recipients whose spouse or common-law partner is incarcerated are considered to be single recipients for the purpose of determining the amount of the GIS benefit.

All GIS benefits including top-ups are adjusted quarterly in line with changes in the CPI, as described in subsection 6. No increase is applied to GIS benefits payable to OAS pensioners who defer receiving their basic pensions in exchange for increased pensions.

A.5 Allowance

The Allowance monthly benefit is designed to recognize the difficult circumstances faced by couples living on the pension of only one spouse as well as by many widowed persons. Since 1999, most of those receiving the Allowance can continue to do so by filing their income tax returns, rather than making a new application each year. Effective 1 July 1999, income (as defined for purposes of the GIS and the Allowance benefits under the Old Age Security Act) received in the previous calendar year is used to calculate the amount of benefits paid during the period starting on 1 July of a calendar year and ending on 30 June of the following calendar year.

Like the GIS, Allowance benefits are not subject to income tax. In addition, also like the GIS, Allowance benefits are not payable outside Canada beyond a period of six months following the month of departure from Canada, regardless of how long the person previously lived in Canada.

A.5.1 Eligibility conditions

The Allowance may be paid to the spouse or common-law partner of a senior receiving OAS and GIS benefits, or to a survivor, who, in each case, is between the ages of 60 and 64 and who has lived in Canada for at least 10 years after reaching age 18. An applicant must also be a Canadian citizen or a legal resident of Canada on the day preceding the approval of the application. The same income exclusions and deductions that apply to the GIS also apply to the Allowance benefit.

The Allowance stops being paid when the person becomes eligible for a basic pension at age 65, leaves Canada for more than six months, or dies. For a couple, the Allowance stops being paid if the older spouse or common-law partner ceases to be eligible for the GIS, or if the spouses separate, divorce, or dissolve their common-law partnership. In addition, in the case of survivors, the Allowance ceases if the person remarries. Sponsored immigrants are subject to the same conditions regarding eligibility as are described in the preceding section regarding the GIS.

As of 1 January 2011, the Allowance is not payable to any individual incarcerated in an institution in accordance with the provisions of the Eliminating Entitlements for Prisoners Act. However, Allowance benefits paid to spouses or common-law partners of incarcerated individuals remain payable.

A.5.2 Amount of benefits

The Allowance is an income tested benefit. Like the GIS, if the recipient is married or living in a common law relationship, the combined income of the recipient and their spouse or common-law partner is taken into account in determining the amount of the Allowance. In addition, to be entitled to the full or partial Allowance benefits, the same rules apply as for GIS benefits regarding admittance to and years of residence in Canada and the recalculation of benefits, described above in section A.4.2.

As of 1 July 2011, top-up benefits are payable to Allowance recipients for both the regular benefit (i.e., Allowance for spouses and common-law partners of GIS recipients) and the survivor benefit. The top-ups are reduced by 25 cents for every dollar of income in excess of $2,000 for Allowance (survivor) recipients and $4,000 of combined income for couples.

The maximum amount payable to the spouse of a pensioner under the regular Allowance benefit is equal to the combination of a full OAS pension and the maximum GIS at the married rate. The maximum amount payable for the survivor Allowance benefit is higher than the regular Allowance benefit, recognizing the higher cost of living alone.

The OAS‑equivalent portion of the maximum monthly Allowance benefit (regular and survivor) is reduced at a rate of 75 cents for every dollar of the person's or couple's monthly income until this portion is reduced to zero. Up to this level of income the GIS portion remains payable at the maximum. For the regular Allowance benefit, both the GIS‑equivalent portion of the Allowance and the pensioner's GIS are then reduced by 25 cents for every additional dollar of the couple's combined monthly income. For the survivor Allowance benefit, the GIS‑equivalent portion is reduced by 50 cents for every additional dollar of monthly income. The reductions to the Allowance benefits are in addition to any applied to the top-ups.

In the case where a pensioner of a spouse of common-law partner is incarcerated, the couple's monthly income for the purpose of determining the spousal Allowance benefit is the monthly income of the spouse or common-law partner only.

All Allowance benefits including top-ups are adjusted quarterly in line with changes in the CPI, as described in subsection 6. No increase is applied to Allowance benefits payable to spouses or common-law partners of OAS pensioners who defer receiving their basic pensions in exchange for increased pensions.

A.6 Inflation adjustments

All benefit amounts under the Old Age Security Act are adjusted at the beginning of each calendar quarter in line with changes in the CPI. However, if the CPI decreases, benefit amounts do not decrease, but are held constant until the CPI exceeds its previous peak.

Appendix B — Data, assumptions and methodology

B.1 Introduction and context

This Appendix describes the data, assumptions, and methodology that underlie the financial projections in the Results section 5 of this report.

Future expenditures and cost ratios are projected over a long period of time, i.e., up to the year 2060, and depend on assumptions such as those regarding fertility, mortality, migration, labour force participation, job creation, unemployment, inflation, and employment earnings. These assumptions form the basis for the projections of future expenditures of the OAS program and cost measurement base (GDP).

Although the demographic and economic assumptions represent the Chief Actuary's best estimates, the resulting estimates in this report should be interpreted with caution. These estimates are not intended to be predictions, but rather projections of the costs of the program. The assumptions used in this report are generally consistent with the best-estimate assumptions used in the Revised 32nd CPP Actuarial Report as at 31 December 2024.

The future expenditures of the OAS program depend on many economic factors. It is important to define the individual economic assumptions in the context of a long‑term overall economic perspective. The Canadian and global economies are going through a period of heightened uncertainty, due in part to escalating trade tensions, environmental risks, and geopolitical conflicts.

Furthermore, the projected continued aging of the population in the future, albeit at a slower pace than observed in the past, combined with the continued retirement of the baby boom generation will certainly create significant social and economic changes. It is possible that the evolution of the working-age population, especially the active population, will be quite different from what has been historically observed and what has been assumed for the purpose of this report.

For this report, it is assumed that, despite the current uncertain outlook for major economies and the projected continued aging of the Canadian population, a moderate and sustained growth in the Canadian and global economies will persist throughout the projection period.

As all the above-mentioned events evolve, the economic and demographic environments continue to be subject to sustained volatility and unpredictability. The OCA will continue to monitor current and emerging trends and will adjust assumptions as needed in future reports.

B.2 Data

The data used for this report are the same as for the Revised 32nd CPP Actuarial Report (see Table 38 of that report). In addition, historical data on OAS program beneficiaries were obtained from Employment and Social Development Canada (ESDC), and the Canada Revenue Agency (CRA) provided income tax return information.

The data used in this report are based on either sex at birth or gender identity, depending on availability from the data. The choice of variable has no material impact on the results. For simplicity, the terms "sex," "male," and "female" are used throughout this report.

B.3 Demographic assumptions

The historical and projected populations of Canada are required for the calculation of future benefits.

The population of Canada as at 1 July 2024 is used as a starting point. The population is then projected by age and sex from one year to the next by adding births and net migrants and subtracting deaths. The annual numbers of births, net migrants (other than for non-permanent residents), and deaths are determined by applying the fertility, migration, and mortality assumptions to the starting population. For non-permanent residents (NPR), however, only fertility and migration assumptions are applied, mortality is not modeled. This reflects the stable demographic profile of this group: individuals frequently enter and exit the NPR population, but the overall composition of the group used for the population projection remains consistent from year to year. Specifically, the average age and sex distributions are held constant, as NPR are assumed to re-enter the population each year with the same characteristics. As a result, NPR are not aged forward in the same way as the rest of the population.

B.3.1 Initial Population as at 1 July 2024

The starting point for the demographic projections is based on the most recent Statistics Canada population estimates as at 1 July 2024 for Canada, by age and sex. The estimates are based on the 2021 Census. These estimates are adjusted by ungrouping ages 100 and older into individual ages using the observed distribution in 2024 of OAS program beneficiaries by age for ages 100 and older.

B.3.2 Fertility rates

There are two definitions for the fertility rate: the total fertility rate and the cohort fertility rate. The total (or synthetic) fertility rate corresponds to the average number of children born in a given calendar year. Specifically, it is the sum of the fertility rates by age group for women aged 15 to 49 in a given calendar year. In comparison, the cohort fertility rate is the average number of children born to a woman in her lifetime, for women born in a specific year. It gives an idea of trends and variations between different generations over time.

The total fertility rate in Canada has declined significantly since the baby boom period, when the rate peaked at nearly 4.0 children per woman in the late 1950s. The baby bust period that followed in the mid-1960s initiated a decline in total fertility rates, resulting in a then-record low of 1.6 children per woman by the mid-1980s. The total fertility rate rose slightly from the late 1980s to the early 1990s, but then generally declined further to a level of 1.5 by the year 2000. Starting in the 2000s, Canada was one of many industrialized countries that saw their total fertility rates increase. By 2008, the total fertility rate for Canada reached 1.7. However, in some industrialized countries, including Canada, the total fertility rate has decreased overall since 2008, which could be largely attributable to the 2008 economic downturn and continuing economic uncertainty. Since 2020, aside from a temporary increase in 2021, fertility rates followed a steep decline. Canada, once in the middle of the pack amongst industrialized countries, is now positioned with Italy and Japan as one of the countries with low fertility rates.

The total fertility rate for Canada stood at 1.41 in 2020. It increased slightly to 1.44 in 2021 but has decreased since then to 1.26 in 2023. The housing crisis, economic uncertainty, anxiety regarding climate change, and the general population's mental health are all factors that may have contributed to the steady decline in the fertility rate in recent years. As well, the increase in the number of NPR may have had a downward effect on the Canadian fertility rate since NPR are less likely to have children during their non-permanent resident status.

Fertility rates are affected by many factors, including social attitudes, reproductive technologies, as well as economic and environmental conditions. Although there have been periods of growth in the total fertility rate in recent decades, it is unlikely that the rate will return to historical levels in the absence of significant societal changes.

In 2021, the Government of Canada worked with provinces and territories to establish a Canada-Wide Early Learning and Child Care (CWELCC) plan. Consistent with what was experienced in Quebec with the introduction of the Childcare Centers, the CWELCC plan could lead to an increase in fertility rates for certain age groups and hence was considered in setting the assumptions for this report. The effect on the fertility rates is assumed to occur over the first several years following the adoption of the system before leveling out.

To determine the ultimate total fertility rate for Canada, the historical fertility rate of each age group was studied and projected independently. For most age groups, a 20-year period of data was used to establish a trending model that provides the best fit using historical patterns and anticipated future movements. The age group 25-29 fertility rate is sensitive to data of recent years, and as such, only partial credibility was used for the most recent years. The age group 30-34 fertility rate does not align well with trending models. Its projection was therefore established based on professional judgment. Some age group rates were also adjusted upward to account for expected effects from the CWELCC plan.

Based on historical analysis and the factors mentioned above, it is assumed that the total fertility rate from 2033 onward for Canada will be 1.35 children per woman, which is lower than the ultimate rate of 1.54 assumed for the 18th OAS Program Actuarial Report.

Although the historical age group rates and resulting total fertility rates are used to set the assumption for the future, it is nonetheless useful and informative to consider the historical progression of the cohort fertility rates. Over time, the assumed age group rates lead to cohort fertility rates which converge to the total fertility rate assumption, as shown for Canada in Table 15.

The cohort fertility rates in Canada have declined over time. For females born in the year 1940, who reached the end of their childbearing years (turned age 49) in 1989, the cohort rate was 2.69. However, for females reaching the end of their childbearing years in 2023 (born in 1974), the cohort fertility rate was 1.83.

Table 16 below shows the assumed fertility rates of each age group and the resulting assumed total fertility rates by calendar year, while Chart 2 shows the historical and projected total and cohort fertility rates for Canada.

Chart 2 - Text version

Historical Total and Cohort Fertility Rates for Canada

Calendar Year	Total Fertility Rates Historical	Cohort turned 30 in	Cohort Fertility Rates Historical
1941	2,831	1941	2,808
1942	2,962	1942	2,816
1943	3,040	1943	2,839
1944	3,008	1944	2,864
1945	3,017	1945	2,883
1946	3,373	1946	2,911
1947	3,594	1947	2,963
1948	3,440	1948	3,026
1949	3,455	1949	3,080
1950	3,451	1950	3,140
1951	3,498	1951	3,186
1952	3,637	1952	3,216
1953	3,715	1953	3,237
1954	3,823	1954	3,256
1955	3,826	1955	3,271
1956	3,854	1956	3,288
1957	3,920	1957	3,295
1958	3,875	1958	3,295
1959	3,928	1959	3,302
1960	3,893	1960	3,316
1961	3,838	1961	3,316
1962	3,755	1962	3,289
1963	3,668	1963	3,236
1964	3,500	1964	3,174
1965	3,145	1965	3,104
1966	2,811	1966	3,028
1967	2,595	1967	2,951
1968	2,457	1968	2,873
1969	2,409	1969	2,791
1970	2,336	1970	2,699
1971	2,130	1971	2,606
1972	1,971	1972	2,505
1973	1,883	1973	2,403
1974	1,837	1974	2,305
1975	1,833	1975	2,214
1976	1,783	1976	2,147
1977	1,756	1977	2,093
1978	1,706	1978	2,043
1979	1,706	1979	1,998
1980	1,686	1980	1,959
1981	1,658	1981	1,927
1982	1,646	1982	1,904
1983	1,634	1983	1,888
1984	1,637	1984	1,877
1985	1,621	1985	1,867
1986	1,603	1986	1,857
1987	1,587	1987	1,850
1988	1,615	1988	1,845
1989	1,668	1989	1,840
1990	1,721	1990	1,830
1991	1,721	1991	1,818
1992	1,714	1992	1,808
1993	1,688	1993	1,796
1994	1,690	1994	1,786
1995	1,673	1995	1,782
1996	1,628	1996	1,777
1997	1,561	1997	1,779
1998	1,552	1998	1,781
1999	1,541	1999	1,786
2000	1,511	2000	1,788
2001	1,537	2001	1,794
2002	1,511	2002	1,800
2003	1,541	2003	1,808
2004	1,551	2004	1,818
2005	1,576	2005	no data -
2006	1,626	2006	no data -
2007	1,668	2007	no data -
2008	1,701	2008	no data -
2009	1,690	2009	no data -
2010	1,645	2010	no data -
2011	1,630	2011	no data -
2012	1,632	2012	no data -
2013	1,609	2013	no data -
2014	1,612	2014	no data -
2015	1,603	2015	no data -
2016	1,594	2016	no data -
2017	1,550	2017	no data -
2018	1,510	2018	no data -
2019	1,477	2019	no data -
2020	1,411	2020	no data -
2021	1,440	2021	no data -
2022	1,329	2022	no data -
2023	1,263	2023	no data -

Projected Total and Cohort Fertility Rates for Canada

Calendar Year	Total Fertility Rates Projected	Cohort turned 30 in	Cohort Fertility Rates Projected
2005	no data -	2005	1,822
2006	no data -	2006	1,820
2007	no data -	2007	1,812
2008	no data -	2008	1,805
2009	no data -	2009	1,793
2010	no data -	2010	1,780
2011	no data -	2011	1,765
2012	no data -	2012	1,754
2013	no data -	2013	1,740
2014	no data -	2014	1,723
2015	no data -	2015	1,705
2016	no data -	2016	1,687
2017	no data -	2017	1,670
2018	no data -	2018	1,645
2019	no data -	2019	1,616
2020	no data -	2020	1,588
2021	no data -	2021	1,564
2022	no data -	2022	1,536
2023	no data -	2023	1,512
2024	1,274	2024	1,491
2025	1,285	2025	1,470
2026	1,296	2026	1,451
2027	1,307	2027	1,430
2028	1,319	2028	1,417
2029	1,326	2029	1,409
2030	1,332	2030	1,401
2031	1,339	2031	1,394
2032	1,346	2032	1,389
2033	1,353	2033	1,384
2034	1,353	2034	1,380
2035	1,353	2035	1,376
2036	1,353	2036	1,373
2037	1,353	2037	1,369
2038	1,353	2038	1,366
2039	1,353	2039	1,363
2040	1,353	2040	1,363
2041	1,353	2041	1,363

Chart 2 Footnotes

Chart 2 Footnote 1

Cohort fertility rates are based on the age of a woman being 30 in a given calendar year. For instance, the cohort fertility rate for the year 2023 pertains to women born in 1993.

Return to Chart 2 footnote 1 referrer

Finally, in accordance with the average experience over the last 10, 20, and 25 years, the assumed ratio of male to female newborns is 1.053, which is the same as for the 18th OAS Program Actuarial Report.

B.3.3 Mortality

Although Canada Life Tables (CLT) for years 2020 to 2023 from Statistics Canada were available in December 2024, they were excluded for purposes of setting long-term mortality rates. Mortality tables for these years reflect significant mortality increases related to COVID-19 and opioid-related deaths, which are assumed to be temporary. For reference, year 2023 life expectancies at birth (without any assumed future mortality improvements) were lower than those in 2019 by 0.6 of a year for males and 0.4 of a year for females.

Long-term future mortality rates are therefore determined by applying assumed mortality improvement rates to Statistics Canada's 2019 CLT. According to the updated 2019 CLT released in December 2024 by Statistics Canada, life expectancies at birth in 2019 without any assumed future improvements in mortality for males and females in Canada were 80.1 and 84.3 years, respectively, compared to 80.3 and 84.4 years under the 18th OAS Program Actuarial Report. At age 65 in 2019, life expectancies for males and females, respectively, were 19.5 and 22.3 years according to Statistics Canada, compared to 19.6 and 22.4 years under the 18th OAS Program Actuarial Report^{Footnote 2}.

The average annual mortality improvement rates experienced in Canada over the 15-year period from 2004 to 2019 by age and sex were used as the starting point for projecting annual mortality improvement rates from 2020 onward. Improvement rates by age and sex for years 2020 to 2039 were determined by cubic interpolation between:

• the 15-year average improvement rates ending in 2019; and
• the assumed ultimate improvement rates described below in respect of the period 2039 and thereafter.

For the year 2039 and thereafter for Canada, the assumed ultimate annual rates of mortality improvement vary by age only and not by sex or calendar year. The assumed ultimate mortality improvement rates are derived using a combination of backward- and forward-looking approaches. The analysis of the Canadian experience over the period from 1954 to 2019 was combined with an analysis of the possible drivers of future mortality improvements. Consideration was also given to benchmarks from peers as well as educational notes and research published by the Canadian Institute of Actuaries, including the Mortality Improvements Research paper published in April 2024. Mortality improvement rates for males at most ages are currently higher than those for females but are assumed to decrease to the same level as female rates from 2039 onward.

The ultimate mortality improvement rate for both sexes for ages 0 to 89 is set at 1.0% per year from 2039 onward for Canada. For ages above 89, the ultimate improvement rate is set to reduce from 0.6% for the age group 90-94 to 0.2% for those aged 95 and older. For comparison, under the 18th OAS Program Actuarial Report, the rate was set at 0.8%, 0.5%, and 0.2% for ages 0-89, 90-94, and 95 and older, respectively, from 2039 onward.

Once the projected mortality rates were calculated using the assumed mortality improvement rates described above, the projected mortality rates were replaced with the actual values for years 2020 to 2023 from the Statistics Canada CLT, and additional adjustments were then applied in order to reflect expected additional increases in mortality rates due to the COVID-19 pandemic as well as to account for the impact of the opioid crisis.

For the year 2024, the COVID-19 mortality adjustment factors by age group were determined using data on the number of COVID-19 deaths from both the Health Infobase of the Public Health Agency of Canada and Statistics Canada. These adjustment factors are phased out by 2026. The pandemic is therefore assumed to have a residual effect on mortality in 2024 and 2025, followed by an assumed full recovery and reversion to the projected unadjusted mortality rates for year 2026 and onward. The COVID-19 adjustment factors for 2024 and 2025 amount to overall increases in mortality rates of 1.5% and 0.5%, respectively.

Over the last decade, Canada has been faced with a significant increase in accidental drug poisoning deaths, and the COVID-19 pandemic has exacerbated the issue. Opioid overdose is a subset of accidental drug poisoning deaths. It is more prevalent in the 25 to 49 age group and among men. Since 2021, there has been a plateau in the yearly opioid-related deaths. The duration and pace of the recovery remain highly uncertain. Thus, in order to reflect the impact of the opioid crisis in the future along with its uncertainty, the mortality rates for the age group 20 to 49 are projected as interpolated rates from the year 2023 actual mortality rates to the projected unadjusted 2039 mortality rates. This reflects the assumption that, over the next decade, the opioid crisis in Canada will subside gradually due to several government initiatives to increase awareness and reduce opioid supply.

Table 17 shows the adjustment (2025), intermediate (2026 to 2038), and ultimate (2039+) assumed annual mortality rates, including all assumed effects from COVID-19 and the opioid crisis, for Canada. The mortality improvement rates shown for the period 2026 to 2038 represent the average rates over that period.

The resulting projected mortality rates in Table 18 indicate a continuous decrease in mortality rates over the long term. For example, the mortality rate at age 65 for males is expected to decrease from about 10 deaths per thousand people in 2025 to 7 deaths per thousand people by 2060. The gap in mortality rates between males and females at most ages is also expected to decrease over the projection period.

Chart 3 shows the historical and projected life expectancies at age 65 since 1966, based on each given year's mortality rates (i.e. without assumed future mortality improvements). Table 19 shows the projected Canadian life expectancies at various ages for the specified calendar years, also based on each given year's mortality rates (without future improvements). Table 20 is similar to Table 19, the only difference being that it takes into account the assumed mortality improvements after the specified calendar years (with future improvements).

Given the continuing trend in increased longevity, Table 20 is considered to be more realistic than Table 19. At the same time, the extended length of the projection period increases the uncertainty of the results presented in Table 20 for younger ages.

From 2025 to 2060, Canadian life expectancy at age 65 (with assumed future mortality improvements) is projected to grow from 21.6 to 24.1 years for males and from 24.1 to 26.4 years for females, as shown in Table 20.

Chart 3 - Text version

Life Expectancies at Age 65 for Canada, without improvements after the year shown (Historical)

Year	Males - historical	Females - historical
1966	13.6	16.9
1967	13.7	17.2
1968	13.6	17.1
1969	13.7	17.3
1970	13.8	17.5
1971	13.9	17.6
1972	13.8	17.6
1973	13.9	17.7
1974	13.8	17.7
1975	14.0	17.9
1976	14.0	18.1
1977	14.2	18.4
1978	14.4	18.6
1979	14.5	18.8
1980	14.5	18.7
1981	14.7	19.0
1982	14.6	18.9
1983	14.8	19.1
1984	14.9	19.2
1985	14.8	19.2
1986	15.0	19.1
1987	15.1	19.4
1988	15.0	19.4
1989	15.3	19.5
1990	15.5	19.7
1991	15.6	19.7
1992	15.8	19.9
1993	15.6	19.7
1994	15.8	19.8
1995	15.9	19.8
1996	16.0	19.8
1997	16.1	19.9
1998	16.1	20.0
1999	16.3	20.1
2000	16.7	20.3
2001	16.9	20.4
2002	17.0	20.4
2003	17.2	20.6
2004	17.5	20.8
2005	17.7	20.9
2006	18.0	21.2
2007	18.0	21.1
2008	18.2	21.3
2009	18.4	21.6
2010	18.7	21.7
2011	18.9	21.8
2012	19.0	22.0
2013	19.1	21.9
2014	19.1	22.0
2015	19.2	21.9
2016	19.4	22.2
2017	19.3	22.1
2018	19.4	22.1
2019	19.5	22.3
2020	19.3	22.0
2021	19.4	22.2
2022	19.1	21.9
2023	19.5	22.2

Life Expectancies at Age 65 for Canada, without improvements after the year shown (Projected)

Year	Males - projected	Females - projected
2023	19.5	22.2
2024	20.1	22.7
2025	20.3	22.8
2026	20.4	23.0
2027	20.5	23.0
2028	20.6	23.1
2029	20.7	23.2
2030	20.8	23.3
2031	20.9	23.4
2032	21.0	23.4
2033	21.1	23.5
2034	21.2	23.6
2035	21.3	23.7
2036	21.3	23.7
2037	21.4	23.8
2038	21.5	23.9
2039	21.6	23.9
2040	21.6	24.0
2041	21.7	24.1
2042	21.8	24.1
2043	21.8	24.2
2044	21.9	24.3
2045	22.0	24.3
2046	22.1	24.4
2047	22.1	24.5
2048	22.2	24.5
2049	22.3	24.6
2050	22.3	24.7
2051	22.4	24.7
2052	22.5	24.8
2053	22.5	24.9
2054	22.6	24.9
2055	22.7	25.0
2056	22.8	25.1
2057	22.8	25.1
2058	22.9	25.2
2059	23.0	25.2
2060	23.0	25.3

Chart 3 Footnotes

Chart 3 Footnote 1

These are calendar year life expectancies based on the mortality rates of the given attained year.

Return to Chart 3 footnote 1 referrer

B.3.4 Net migration

Net migration refers to the number of immigrants less the number of net emigrants (i.e. the number of emigrants less the number of returning Canadians) plus the net increase in the number of NPR. Net migration is generally recognized as being a volatile component of population growth since it is subject to a variety of demographic, economic, social, and political factors. In more recent years, it has been even more volatile.

The level of net migration for Canada as a percentage of the population from 2000 to 2015 has varied between 0.5% and 0.8%. In 2016, net migration began accelerating, surpassing 0.8% in part due to the introduction of the Express Entry system by the Government of Canada. By 2019, net migration reached 1.19% of the population. Since then, net migration has been more volatile. In 2020 and 2021, there was a significant decrease in net migration as a percentage of the population, with the rate dropping to 0.86% and 0.39%, respectively in 2020 and 2021. The COVID-19 pandemic led to border closures making travel between countries difficult, which negatively impacted migration. In 2022, 2023, and 2024, net migration increased to historically high levels of 1.68%, 2.83%, and 2.88% of the population, respectively. This was due in particular to the removal of various pandemic-related safety measures, such as Canadian borders fully reopening in October 2022, along with efforts to fill job vacancies in key sectors of the labour market by the admittance of a large number of NPR.

The level of NPR as a percentage of the population has increased steadily but remained considerably below 5% for the years prior to the COVID-19 pandemic. Since 2021, the number of international students and temporary workers with permits under the International Mobility Program has grown substantially. They represent the two largest groups within NPR, accounting for more than three quarters of NPR in each of the past 10 years. By the end of 2024, the number of NPR reached unprecedented levels, representing 7.3% of the population. By contrast, based on the 20-year average ending in 2024, NPR represented 2.7% of the population.

To select the assumptions regarding the short-term and ultimate net migration rates, the components of net migration were analyzed separately by considering trends in the historical data as well as qualitative factors that could influence future trends. Consideration was also given to the federal government's short-term immigration targets and to long-term perspectives of various experts regarding levels of future immigration and non-permanent residents.

In the 2024 Annual Report to Parliament on Immigration, the Government of Canada released details on its Immigration Levels Plan for 2025 to 2027. The target numbers of new immigrants are set at 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027. Also, the government announced, for the first time ever, short-term targets for the level of NPR, specifically: NPR inflows subject to targets set for students and workers to achieve an NPR level (as a % of the population) of 5.0% by the end of 2026.

Considering the historical experience and the immigration plan of the government, immigration as a percentage of the population is assumed in the short term to decelerate but remain above pre-COVID-19 levels due to the continuing need to fill skill shortages in the labour market and maintain a growing population. In the long term, it is assumed that higher sustained immigration will be necessary to maintain population and economic growth, aligning with forecasts from other experts.

The immigration rate is expected to decrease from 1.12% of the population in 2024 to 0.96% in 2025, 0.92% in 2026, and 0.88% in 2027. After that, it is projected to gradually decrease to an ultimate rate of 0.82% by 2034. The ultimate rate of 0.82% corresponds to the 20-year average ending in 2024, which was selected to give some weight to generally higher levels of immigration observed since 2016 while still reflecting longer-term historical trends.

The historical net emigration rate has been relatively stable since the late 2000s. The ultimate assumption for that component is based on an 8-year average ending in 2024 considering that Statistics Canada revised its methodology for reporting emigration data in 2017. The net emigration rate is expected to decrease slightly from 0.12% of the population in 2024 to 0.11% by 2026 and remain at that level thereafter.

Regarding the assumed level of NPR, current government NPR targets are short-term, and there is limited consensus among other experts on future NPR trends. To address the higher levels and volatility of the number of NPR in recent years, a new method was developed for this report to project the number of NPR separately from the rest of the population. For this purpose, an assumption is made for each year of the projection period regarding the level of NPR as a percentage of the population. The resulting annual changes in the number of NPR can then be determined and flow through the overall net migration rate.

The NPR assumption is divided into three periods. The first period reflects government targets ending in 2027. The second period addresses demographic aging up to 2035, with the NPR level assumed to reduce but remain elevated. The third period, ending in 2050, assumes the level of NPR will return to levels that are more in line with longer-term historical averages. As such, the level of NPR as a percentage of the population is assumed to trend down linearly across these periods: from 7.3% observed in 2024, to 5% in 2026, 4.0% in 2035, and then to an ultimate rate of 2.5% in 2050, remaining at that level thereafter. The ultimate rate of 2.5% was selected to give some weight to recent higher levels of NPR, while still reflecting longer-term historical trends.

Based on the foregoing, the actual net migration rate in 2024 of 2.88% of the Canadian population is assumed to decrease to -0.34% in 2025 and -0.29% in 2026, and is then assumed to increase to 0.82% in 2027. Thereafter, the net migration rate is assumed to gradually transition to an ultimate level of 0.72% of the population in 2051 (as shown in Chart 4).

Although the net migration rate represents the combined effect of all migration components, the largest fluctuations in the early projection years shown in Chart 4 are due to the Government of Canada's short-term targets and the assumed changes in net migration components as percentages of the population. Thereafter, the assumed changes in the immigration rate and NPR levels result in a decrease in the net migration rate until 2050, after which the net migration rate stabilizes at 0.72%.

The distributions of immigrants, net emigrants, and NPR by age and sex used for the demographic projections are averaged over the historical 10-year period from 2010 to 2019 due to the significant volatility in more recent years.

Chart 4 shows the net migration experience since 1972 and the projected rates starting in 2025.

Chart 4 - Text version

Net Migration Rate, including non-permanent residents (Canada) (Historical)

Year	Historical
1972	0.42%
1973	0.53%
1974	0.74%
1975	0.76%
1976	0.58%
1977	0.44%
1978	0.28%
1979	0.25%
1980	0.56%
1981	0.49%
1982	0.47%
1983	0.29%
1984	0.24%
1985	0.23%
1986	0.33%
1987	0.60%
1988	0.63%
1989	1.07%
1990	0.75%
1991	0.50%
1992	0.54%
1993	0.51%
1994	0.55%
1995	0.52%
1996	0.57%
1997	0.55%
1998	0.44%
1999	0.45%
2000	0.57%
2001	0.76%
2002	0.76%
2003	0.58%
2004	0.61%
2005	0.62%
2006	0.66%
2007	0.67%
2008	0.75%
2009	0.80%
2010	0.77%
2011	0.67%
2012	0.75%
2013	0.74%
2014	0.70%
2015	0.48%
2016	0.86%
2017	0.87%
2018	1.15%
2019	1.19%
2020	0.86%
2021	0.53%
2022	1.68%
2023	2.83%
2024	2.88%

Net Migration Rate, including non-permanent residents (Canada) (Projected)

Year	Projected
2024	2.88%
2025	-0.34%
2026	-0.29%
2027	0.82%
2028	0.67%
2029	0.67%
2030	0.65%
2031	0.64%
2032	0.63%
2033	0.63%
2034	0.61%
2035	0.61%
2036	0.64%
2037	0.63%
2038	0.63%
2039	0.62%
2040	0.63%
2041	0.63%
2042	0.63%
2043	0.63%
2044	0.63%
2045	0.62%
2046	0.62%
2047	0.61%
2048	0.62%
2049	0.62%
2050	0.62%
2051	0.72%
2052	0.72%
2053	0.72%
2054	0.72%
2055	0.72%

B.3.5 Projected population and its characteristics

The historical and projected evolution of the Canadian population age distribution since 1966 is shown in Chart 5. One can easily observe that the triangular shape of the 1960s has become more rectangular over time. This is projected to continue and indicates an aging population. The chart also reveals that the number of people aged 85 and over is expected to increase dramatically over the coming decades.

Chart 5 - Text version

Age Distribution of the Population of Canada

Age group	1966	2024	2030	2050
0-4	2,226,705	1,873,533	1,939,941	2,060,887
5-9	2,318,937	2,155,845	1,992,510	2,167,175
10-14	2,112,657	2,235,131	2,178,887	2,230,644
15-19	1,887,515	2,315,434	2,459,261	2,411,791
20-24	1,540,390	2,744,222	2,790,445	2,680,842
25-29	1,294,403	3,042,351	2,673,828	2,751,841
30-34	1,282,018	3,152,014	2,898,670	3,001,472
35-39	1,313,123	2,955,034	3,129,971	3,153,848
40-44	1,282,480	2,800,440	2,964,624	3,138,398
45-49	1,104,061	2,541,391	2,777,706	2,953,986
50-54	1,002,328	2,446,595	2,520,095	3,072,794
55-59	826,590	2,493,717	2,389,170	3,165,750
60-64	671,713	2,712,771	2,393,328	2,904,462
65-69	537,983	2,442,561	2,618,853	2,643,682
70-74	432,206	1,972,708	2,355,926	2,310,024
75-79	303,746	1,532,797	1,851,947	2,038,139
80-84	179,383	960,179	1,353,080	1,785,566
85-89	77,830	554,453	748,548	1,548,072
90+	26,799	357,423	463,700	1,299,750

The population of Canada as at 1 July 2024 is 41.3 million. Table 21 presents the projected population of Canada as at 1 July for selected age groups and years. The number of people reaching age 65 is a good indicator of the number of new OAS basic pension beneficiaries coming into pay each year.

Chart 6 shows the evolution of the population of Canada, split by age groups 0 to 19, 20 to 64, and 65 and older, from 1970 to 2060. Table 22 shows the variations in the relative proportions of various age groups for Canada throughout the projection period. The proportion of people aged 65 and over is expected to increase significantly from 19.6% of the total population in 2025 to 26.2% by 2060. The number of people aged 65 and older as a proportion of the number of people aged 20 to 64 increases over the same period, from 32.9% in 2025 to 47.1% by 2060. This proportion significantly affects the ratio of OAS program benefit expenditures to GDP.

Chart 6 - Text version

Population of Canada (millions) (Historical)

Year	Population 0-19	Population 20-64	Population 65+
1970	8,638,898	11,391,656	1,715,942
1971	8,597,358	11,602,264	1,762,410
1972	8,560,270	11,850,776	1,807,417
1973	8,511,358	12,125,455	1,854,964
1974	8,457,516	12,446,000	1,904,453
1975	8,407,717	12,778,483	1,957,075
1976	8,349,900	13,077,319	2,022,589
1977	8,273,227	13,363,187	2,089,429
1978	8,177,708	13,630,034	2,155,461
1979	8,074,962	13,896,479	2,230,103
1980	7,993,606	14,216,313	2,305,748
1981	7,902,370	14,540,582	2,376,963
1982	7,818,879	14,856,607	2,441,456
1983	7,714,177	15,153,392	2,498,882
1984	7,610,176	15,433,590	2,563,287
1985	7,520,596	15,673,087	2,648,433
1986	7,472,733	15,890,982	2,736,563
1987	7,483,331	16,123,976	2,839,294
1988	7,519,797	16,343,214	2,928,736
1989	7,594,715	16,654,277	3,027,789
1990	7,668,201	16,898,777	3,124,160
1991	7,723,080	17,101,852	3,212,488
1992	7,799,279	17,280,761	3,291,224
1993	7,858,191	17,460,429	3,366,144
1994	7,917,798	17,648,377	3,434,488
1995	7,955,693	17,840,138	3,506,480
1996	7,995,697	18,035,277	3,579,244
1997	8,005,887	18,245,732	3,654,329
1998	8,011,074	18,420,025	3,724,074
1999	7,993,938	18,621,859	3,785,489
2000	7,979,400	18,855,077	3,851,253
2001	7,966,623	19,132,410	3,921,822
2002	7,955,075	19,414,926	3,989,198
2003	7,922,457	19,659,631	4,060,373
2004	7,897,071	19,905,932	4,135,804
2005	7,875,351	20,153,868	4,213,513
2006	7,859,988	20,392,351	4,318,854
2007	7,855,627	20,612,312	4,420,947
2008	7,871,149	20,835,737	4,540,412
2009	7,881,106	21,080,392	4,668,571
2010	7,874,947	21,327,457	4,803,498
2011	7,863,549	21,520,517	4,955,155
2012	7,860,485	21,698,179	5,154,731
2013	7,864,185	21,864,171	5,352,636
2014	7,878,306	22,013,872	5,541,888
2015	7,895,568	22,087,223	5,721,707
2016	7,957,933	22,233,185	5,919,685
2017	8,009,245	22,410,347	6,125,483
2018	8,081,516	22,653,664	6,337,440
2019	8,142,894	22,902,342	6,573,259
2020	8,180,034	23,039,083	6,809,521
2021	8,149,439	23,044,435	7,045,990
2022	8,265,033	23,372,468	7,298,433
2023	8,418,210	24,107,547	7,557,727
2024	8,579,943	24,888,535	7,820,121

Population of Canada (millions) (Projected)

Year	Population 0-19	Population 20-64	Population 65+
2025	8,551,960	24,570,944	8,083,474
2026	8,525,954	24,255,365	8,361,790
2027	8,554,026	24,350,841	8,629,432
2028	8,562,617	24,400,138	8,900,177
2029	8,567,658	24,463,542	9,157,162
2030	8,570,598	24,537,837	9,392,055
2031	8,575,656	24,641,240	9,585,743
2032	8,576,342	24,771,167	9,747,114
2033	8,574,084	24,909,994	9,896,607
2034	8,570,698	25,038,453	10,041,833
2035	8,563,564	25,166,158	10,183,854
2036	8,557,914	25,303,377	10,320,668
2037	8,557,728	25,454,118	10,431,301
2038	8,565,202	25,605,654	10,526,682
2039	8,578,354	25,746,769	10,615,674
2040	8,598,602	25,876,255	10,707,778
2041	8,627,760	25,998,379	10,792,855
2042	8,656,042	26,120,732	10,873,377
2043	8,699,185	26,224,909	10,952,019
2044	8,735,065	26,326,075	11,035,738
2045	8,761,660	26,423,481	11,127,601
2046	8,786,501	26,513,331	11,224,197
2047	8,811,072	26,595,846	11,319,140
2048	8,832,966	26,677,640	11,417,590
2049	8,852,456	26,754,622	11,518,657
2050	8,870,496	26,823,391	11,625,233
2051	8,895,314	26,930,018	11,732,871
2052	8,919,914	27,038,585	11,837,241
2053	8,943,971	27,142,268	11,945,892
2054	8,968,037	27,226,688	12,073,225
2055	8,992,660	27,286,347	12,224,976
2056	9,017,743	27,340,154	12,383,133
2057	9,042,729	27,399,978	12,537,011
2058	9,067,376	27,461,645	12,691,695
2059	9,091,683	27,526,377	12,846,505
2060	9,115,418	27,589,567	13,006,447

Table 23 shows the projected components of population growth, which is defined as the projected number of births plus net migrants less the projected number of deaths from 2025 to 2060. The number of births is projected to exceed deaths until 2034. Thereafter, all population growth is projected to come from migration.

The population of Canada is projected to decline by about 0.2% in each of 2025 and 2026, followed by an increase of 1.0% in 2027. Population growth is then projected to slowly decrease by about 0.5% by 2040 and remain at that level thereafter. The population of Canada is expected to reach 49.7 million by 2060.

B.4 Economic assumptions

The list of assumptions required to project the various economic indices, benefit expenditures, and cost measurement base is quite extensive. The following sections cover the main assumptions.

The economic outlook rests on the assumed evolution of the labour market, that is, labour force participation, employment, unemployment, inflation, and the increase in average employment earnings, as well as the increase in the GDP. All of these factors must be considered together and form part of an overall economic perspective.

The projected expenditures presented in this report are also expressed as cost ratios relative to the GDP. The GDP is projected using underlying assumptions of productivity, hours worked, and employment growth as determined in the Revised 32 nd CPP Actuarial Report as at 31 December 2024.

B.4.1 Labour market

Below are the main components of the labour market that are used to determine the employed population.

Total population is split between:

1. Population aged 0 to 14 years old;
2. Population aged 15 years old and over, which is split between:
   1. Active population (labour force)^{Section B.4.1 Footnote *}
      • Employed;
      • Unemployed and looking for employment.
   2. Inactive population^{Section B.4.1 Footnote *}

B.4.1.1 Active population

Table 24 to Table 26 provide projections of the active and employed populations and associated labour force participation, employment, and unemployment rates for Canada.

Despite the recent increases in immigration and projected long-term net migration inflow, the population is still expected to age over the projection period. Given that labour force participation rates are progressively lower for age groups over 50, the aging of the population will result in a larger proportion of the population in age groups with lower participation rates, and thus will decrease the overall participation rate throughout the projection period.

For the purpose of projecting the participation rates, the projection period has been divided into two periods: 2025 to 2035 and from 2035 onward. From 2025 to 2035, the projected participation rates are based on an analysis of historical data and expected trends for each age group and sex. From 2035 onward, the participation rates are held constant. This long-term assumption combined with a slower growth in the working-age population relative to the older age groups results in a rate of growth of approximately 0.4% for the Canadian active population (that is, the labour force) after 2035.

Some examples of the main trends that are taken into account in developing the projected participation rates are discussed below, namely, the narrowing of the male-female gap, longer working lives, and employment opportunities stemming from demographic shifts.

The overall labour force participation rates in Canada (the active population expressed as a proportion of the population aged 15 and over) from 1976 to 2024 clearly show a narrowing of the gap between male and female rates. Although the increase in participation rates of females aged 18 to 69 has slowed down since the mid-2000s, the increase was significant over the previous decades.

In 1976, overall male labour force participation (ages 15 and over) was about 78% compared to only 46% for females, which represents a gap of 32%. This gap has narrowed to 8.5% in 2024 (participation rates of 69.7% for males, 61.2% for females). It is assumed that females will continue to narrow the gap in participation rates but at a slower pace, with the gap gradually reducing to about 7.5% by 2035 (68.2% for males vs. 60.7% for females). A part of this reduction comes from an assumed sustained impact on the female labour force due to the Canada-Wide Early Learning and Child Care plan.

Although the participation rates of older age groups are lower compared to younger groups, the trend towards longer working lives is expected to continue, and as such, it is assumed that there will be further increases in participation rates for older age groups. Continued trends in increasing flexibility in work arrangements, the projected continued increases in life expectancy, and possible insufficient retirement savings are assumed to encourage older workers to delay their retirement and exit the labour force at a later age.

The participation rates for those aged 55 to 59 are assumed to increase from 83.1% to 84.0% for males and from 73.7% to 76.0% for females over the period 2025 to 2050. Over the same period, the participation rates for those aged 60 to 64 are assumed to increase from 65.4% to 66.0% and from 51.8% to 53.0% for males and females, respectively, and the participation rates for those aged 65 to 69 are assumed to increase from 35.1% to 37.0% and from 24.0% to 26.0% for males and females, respectively.

In addition to the assumed future increase in participation rates of women and older workers, as well as an assumed continued reliance on skilled immigrant workers, it is expected that there will be upward pressure on labour force participation rates as the working-age population expands at a slower pace than the older sector of the population. The participation rates for all age groups are thus expected to increase due to the attractive employment opportunities resulting from the demographic shift as the population ages.

Although the participation rates of both men and women and all age groups are expected to increase over the projection period from their 2024 levels, these increases in participation rates are not sufficient to offset the projected decrease in the overall participation rate (ages 15 and over) due to the demographic shift from population aging.

B.4.1.2 Employment (Canada)

In Canada, the annual job creation rate (i.e. the change in the number of persons employed) has been on average about 1.6% since 1976. However, this rate has varied over time. It is assumed that the job creation rate will be -0.7% in 2025, -0.4% in 2026, 1.2% in 2027, 1.0% in 2028, 0.7% in 2029, and then trend lower thereafter.

The job creation rate is associated with the variation in assumed unemployment rates as well as Canada's labour force growth rate. The unemployment rate is assumed to increase from 6.3% in 2024 to 7.0% in 2025, 6.7% in 2026, and 6.4% in 2027, before reaching its ultimate rate of 6.1% in 2028. These rates are based on recent experience and various economic forecasts.

The negative job creation rate in 2025 and 2026 coincides with the projected decrease in the Canadian population attributable to the decrease in the level of NPR as well as the initial assumed increase in unemployment. The rebound in the job creation date from 2027 onward is associated with the decreasing unemployment rate as well as the projected return to growth in the Canadian population.

Over the long term, the job creation rate is projected to be the same as the labour force growth of 0.4%. This reflects the ultimate assumption for the unemployment rate of 6.1% for year 2028 and thereafter.

Table 27 and Table 28 show the projected number of employed persons and employment rate for those aged 18 to 69, for males and females, respectively, in Canada.

B.4.2 Annual increase in prices (inflation rate)

The increase in prices (inflation rate) assumption is needed to determine the indexation of benefits for any given calendar year. It is also used in the determination of the annual nominal increase in average employment earnings.

Price increases, as measured by changes in the Consumer Price Index (CPI), fluctuate through time. Since the mid-1950s, the trend was generally upward through the early 1980s and then generally downward until the introduction of the inflation-control targets in the early 1990s, at which point inflation began to stabilize. The average annual increases in the CPI over the 50, 20, and 10-year periods ending in 2024 were 3.7%, 2.2%, and 2.5%, respectively.

On December 13, 2021, the Bank of Canada and the Government renewed their commitment to keep inflation between 1% and 3% with a target at the mid-point of 2% until the end of 2026^{Footnote 3}. They further noted that the Bank will use the flexibility of the 1% to 3% control range to actively seek the maximum sustainable level of employment to an extent that is consistent with keeping medium-term inflation expectations at 2%.

Despite the mid-point target of 2%, inflation, as measured by changes in the CPI, tends to fluctuate from year to year. For instance, supply disruptions during the COVID-19 outbreak, global imbalances in supply and demand, and pent-up demand following the lifting of restrictions in 2021 and 2022, as well as the war in Ukraine that commenced in February 2022, contributed to upward pressure on prices, resulting in inflation peaking at 8.1% in June 2022. As the pandemic became more manageable, fiscal stimulus diminished, and demand and supply returned to equilibrium, the inflation rate gradually aligned with the Bank’s target. The inflation rate reached the target of 2% in August 2024. Price increase continued falling, reaching 1.8% in December 2024 partly due to the temporary GST/HST holidays on certain goods and services, which began on December 14, 2024. On an annual basis, the average inflation rate in 2024 was 2.4%. In 2025, the inflation rate had largely stabilized near the Bank’s target. Although energy prices increased in early 2026 due to the conflict in the Middle East, inflation remained within the Bank of Canada’s 1–3 per cent target range.

The inflation rate in Canada is assumed to be 2.2% in 2025, decreasing to 2.1% in 2026 and returning to the 2% target by 2027. These assumed price increases are based on short-term forecasts from various economists^{Footnote 4} as well as the expectation that the Bank of Canada and federal Government will continue to renew the inflation target at 2.0% and that the Bank of Canada will be successful in keeping inflation at its mid-point target in the long term.

B.4.3 Real wage increases

Two wage measure are used in this report: the average annual earnings (AAE) and the average weekly earnings (AWE). The assumed increase in AAE is used to project the income of future beneficiaries, while the assumed increase in the AWE is used to project the increase in the YMPE from one year to the next.

For this report, increases in the real AAE and real AWE are assumed to be the same over the entire projection period, and are referred to as real wage increases. The real wage increase can be measured using the difference between the increases in the nominal average wage and the CPI. In this case, the nominal average wage is defined as the ratio of the total nominal earnings to total civilian employment in the Canadian economy as a whole.

The relationship between real wages and the labour market and overall economy is complex. In general, real wages are subject to downward pressure as the demand for workers decreases. On the other hand, one could expect upward pressure on wages if the size of the labour force fails to keep pace with a growing economy.

For this report, it is assumed that real wages will grow at an annual rate of 0.8% from the year 2025 onward. For comparison, under the 18th OAS Program Actuarial Report, real wages were assumed to increase by 0.9% per year over the long term.

The real wage increase is related to the growth in total labour productivity plus the growth of various factors, as shown in Table 29. More detail on each factor is provided below the table.

Labour productivity in the above table is defined as the ratio of the real GDP to total hours worked in the Canadian economy. As shown in Table 29, growth in labour productivity has decreased since the 1960s. However, long-term productivity is expected to increase as a result of continued technological advancements, government productivity boosting policies, and increases in capital stock investments. At the same time, a labour force reliance on immigration for future labour force growth and lower gains from increases in skills and education levels are expected to moderate productivity growth.

In addition, labour productivity could be affected by the timing and pace of Canada’s transition to a green economy. There is a substantial uncertainty surrounding the effect of this transition on the composition of Canada’s economy.

Based on the foregoing, a labour productivity growth of 0.95% is assumed for the long term.

The compensation ratio is the ratio of the total compensation received by workers to the nominal GDP, thereby reflecting the extent to which changes in productivity are shared between capital and labour. While the ratio fluctuated during the last 25 years ending in 2023, it is assumed that there will be no change in the compensation ratio over the long term.

The earnings ratio is the ratio of total workers’ earnings to total compensation. Changes in the earnings ratio reflect changes in the compensation structure offered to employees. The historical average decline in the earnings ratio of 0.15% per year from 1961 to 2023 has been primarily due to the faster growth in supplementary labour income, such as employer contributions to pension plans, health benefit plans, the CPP, and the Employment Insurance program, compared to earnings. Given that a significant portion of the historical decrease in the earnings ratio can be explained by the increase in CPP contributions resulting from the increase in the contribution rate from 3.6% in 1986 to 9.9% in 2003, the earnings ratio is not expected to decline as fast as it has in the past. However, it is expected that the cost of health programs will continue to increase in the future and exert downward pressure on the earnings ratio. Based on the foregoing, it is assumed that the long-term earnings ratio will decline by 0.05% per year.

The average hours worked is defined as the ratio of total hours worked to total employment in the Canadian economy. There was a decrease in the average hours worked between 1961 and 2023. In the future, the assumed steady increases in productivity and the higher participation rates of older workers, who generally work fewer hours, could continue to apply negative pressure on the average hours worked. It is assumed that in the long term, the average hours worked will decline by 0.10% per year.

Finally, the price differential or “labour’s terms of trade” is the ratio of the GDP deflator (defined as the ratio of nominal to real GDP) to the CPI. While the ratio has fluctuated in the past, it is assumed that the price differential will remain stable without change over the long term.

B.4.4 Gross domestic product

The GDP is a suitable basis for a comparison of costs since benefits are financed through general revenues and not on the basis of employment earnings.

The long-term GDP is projected using underlying assumptions of productivity, hours worked, and employment growth as determined in the Revised 32nd CPP Actuarial Report. More specifically, the long-term assumed annual rate of productivity growth is 0.95%, while the assumed average annual rate of change in hours worked is -0.1%. Employment growth is assumed to vary over time, reflecting the projected evolution of the labour force and the effects of demographic and population ageing assumptions. In the long run, employment growth is assumed to attain approximately 0.35% per annum, resulting in long-term real GDP growth of approximately 1.2%. The short-term GDP projection is informed by the 2025 Canadian federal budget.

In the previous report, the GDP was projected using the assumed growth in total employment earnings (as projected under the 31st CPP Actuarial Report as at 31 December 2021). The method has been refined to align GDP growth with productivity and labour input drivers, rather than using earnings growth as a proxy. Under the previous approach, the earnings-based projection implicitly incorporated earnings ratio and compensation ratio components; under the refined approach, these components are removed so that GDP growth reflects productivity, hours worked, and employment levels only. This adjustment improves consistency between the GDP projection and the economic assumptions used to determine real wage growth and labour market outcomes.

It is noteworthy that the Consumer Price Index (CPI and the GDP deflator, used to express GDP in nominal terms, are assumed to be the same for the purpose of this report.

B.5 Recipient rates and distribution by level of benefit

The recipient rate for an OAS program benefit refers to the proportion of the Canadian population that has received, receives, or is projected to receive that benefit. Since benefits are computed for age-sex cohorts as opposed to individuals, recipient rates by age, sex, type and level of benefit are required. Beneficiary data from ESDC for years 2010-2024 were used to create a table for each benefit type, consisting of the number of beneficiaries by sex, age, and six levels of benefit as a percentage of the maximum benefit (0-19%, 20-39%, 40-59%, 60-79%, 80‑99%, and 100% and over). Historical statistics provided by ESDC on a similar basis were used for the years 1983 to 2009. The highest level of benefit (100% of the maximum and over) includes those GIS beneficiaries with partial OAS pensions, who consequently see their supplement increased by the difference between the maximum OAS pension payable and the partial pension. The additional amount may result in the supplement exceeding the maximum GIS payable.

The actual recipient rates in each of the cells described above are obtained by dividing the number of beneficiaries in each cell by the relevant population of Canada. The data include benefits paid outside Canada.

B.5.1 OAS basic pension

The historical recipient rates of sex-distinct cohorts for the basic pension were studied to determine the best-estimate assumptions. The ultimate OAS basic pension recipient rates are set equal to the projected recipient rates for the cohort reaching age 65 in 2024. The ultimate recipient rates are determined as follows:

• Ages 65 to 70: average of observed rates for years 2022 to 2024, assumed for all years from 2025 onward.
• Ages 71 and over: based on historical recipient rates from years 2015 to 2024, then projected to decrease according to a linear interpolation between 2024 and the ultimate year. The ultimate year refers to the year when the cohort age 65 in 2024 reaches the given age. The ultimate rates for ages 71 to 74 are further adjusted to provide a smooth transition from age 70 to 75.

As the assumed recipient rates are based on historical experience that already includes voluntary deferrals (effective 1 July 2013), no adjustment is applied to the recipient rates for deferrals. However, voluntary deferrals are assumed in order to develop assumed distributions of the ages of pension take-up for each attained age. These distributions are used in turn to determine the assumed increase in pension applicable at an attained age from the greater effect of pension adjustment from deferral or the accumulation of additional years of residence (for partial pensions).

The assumed deferral rates are based on historical and assumed recipient rates. Table 30 presents the deferral assumptions for cohorts reaching age 65 in 2024 and thereafter, for males and females. The assumptions represent the percentages of the cohorts who defer pension take-up to a given age. This report assumes a greater percentage of the population will defer their take-up than in the previous report.

As shown in Table 30, deferrals past the age of 70 occur, for various reasons, including waiting to accumulate more years of residence for those with partial pensions or not applying for the pension due to unawareness of the benefit.

For the cohort age 65 in 2024 and thereafter, 3.6% of males and females are assumed to start receiving their OAS basic pension midyear at age 65.5.

The basic pension recipient rates for cohorts reaching age 65 in 2024 and thereafter are assumed to increase from 74.6% at age 65 to 100.4% at ages 90 and over for males and from 77.6% at age 65 to 99.0% at ages 90 and over for females. OAS basic pension recipient rates include benefits paid outside Canada under international social security agreements, and as such, can exceed 100%.

The basic pension recipient rates by age and sex are further broken down by level of benefit using distributions of recipient rates by level of benefit, expressed as a percentage of the maximum benefit (based on the number of years of residence in Canada). The historical distributions by level of benefit were derived from OAS beneficiary data as at 31 December of each year over the period 2015 to 2023. The distribution by level of benefit at age 65 in 2023 is assumed to apply at age 65 for all years thereafter, and the benefit level distributions for ages 66 and above are assumed to apply for year 2024 and thereafter.

For any given cohort reaching age 65 in 2024 or after, the distributions by level of benefit for ages 66 and over are projected based on historical data that reveal that, for any given cohort, there is a significant proportion of beneficiaries coming into pay who have a small number of years of residence and thus receive partial benefits. Recent experience confirms that the proportion of recipients receiving a partial pension continues to grow, although at a lesser rate than previously projected. As such, it is assumed that as a cohort progresses in age, the proportion of beneficiaries receiving a full pension will decrease while the proportion of beneficiaries receiving a partial benefit will increase, but to a somewhat lesser extent than in the previous report.

Table 31 and Table 32 show the evolution of male and female OAS basic pension recipient rates by age, calendar year, and level of benefit. The assumed ultimate basic pension recipient rates for cohorts age 65 in 2024 and thereafter are fully reached at all ages in calendar year 2049.

The OAS Recovery Tax reduces the amount of the basic pension payable for high-income pensioners (see section 3 of Appendix A) through a repayment amount. The projected Recovery Tax amounts and number of beneficiaries affected by it presented in this report reflect that various factors may have an impact. These include pension income splitting, TFSA utilization, and future sources of additional income.

Statistics on the proportion of beneficiaries affected (fully or partially) by the OAS Recovery Tax were estimated for tax years 2015 to 2023 using data from ESDC and CRA.

The proportions of beneficiaries affected by the Recovery Tax in 2024 and thereafter is projected from the historical proportions by assuming that initial retirement income will increase in line with wage growth, while the Recovery Tax income limits increase in line with inflation.

Projections from the Revised 32nd CPP Actuarial Report as well as data from ESDC and CRA were used to make adjustments to the Recovery Tax projections in respect of the estimated impacts of TFSAs and the additional CPP and QPP benefits. Given the absence of experience data for the additional CPP and QPP and limited data regarding the TFSAs (introduced in 2009), the results presented in Table 33 and Table 34 should be interpreted with caution.

Table 33 presents the projected number and percentage of OAS beneficiaries affected by the Recovery Tax. The percentage of beneficiaries affected by the OAS Recovery Tax is projected to increase from 8.2% in 2026 (2.7% full and 5.5% partial) to 10.5% (3.5% full and 7.0% partial) by 2060.

The impact of the OAS Recovery Tax on total benefits payable is obtained using the projected number of beneficiaries who are affected and the assumed reduction in their average benefit (100% reduction for those with a full repayment and a 31.9% reduction in benefit for those with a partial repayment). It is estimated that, in 2026, the Recovery Tax will have the effect of reducing the total amount of basic pensions payable by about $3.3 billion or 4.6%. Table 34 presents the projected repayment amounts.

B.5.2 GIS and Allowance

The annual average recipient rates for the GIS and Allowance benefits, by age, sex, type and level of benefit in 2024 are used as the starting point for determining the best-estimate assumptions.

The formulas used in the projection of the GIS and Allowance recipient rates take into account the assumption that, for each cohort of individuals who may become eligible for these benefits, the initial retirement income will consist mainly of CPP and QPP benefits (including the additional benefits) that reflect increases in line with wage growth prior to retirement. At the same time, it is assumed that the income limits for the GIS and Allowance will have increased in line with inflation prior to retirement. Together this would lead to a smaller percentage of individuals expected to become GIS or Allowance beneficiaries over the projection period. However, this decline in eligibility is partially offset by the projected effect of TFSAs over time due to the transfer of non-registered investments, and RRSP and RRIF investments toward TFSAs. In fact, TFSA-related income is excluded from the determination of GIS and Allowance benefits, which leads to an increase in both the number of GIS and Allowance beneficiaries and amount of benefits.

Table 35 to Table 38 presents the projected GIS and Allowance recipient rates for cohorts reaching the ages 60 and 65 by age, sex, type and level of benefit.