F has been either a lawyer or a senior politician his entire adult life. He’s married to a lawyer who is also now a politician. F has a pension from being finance minister and MPP in Ontario, and he will have another after being finance minister and MP federally. His wife, Christine Elliott, will also have a political pension. Once F’s done in Ottawa, he’ll surely find seats on many corporate boards, and be invited as a partner into one of the larger Bay Street lawgopolies. His wife may run for premier. And win.
In short, this family is set set. F and Christine will have a household pension income in retirement of at least $310,000, indexed and never-ending.
Intellectually, I have no doubt he knows the impact his OAS budget change will have. But emotionally, not so sure. His wealth certainly will shield him from ever experiencing what the loss of $6,000 a year might be, and he will remain wanted, employed and important for as long as he wishes.
As you know, the feds this week began a process which will make everybody now under the age of 54 wait two years longer to get an important part of the public pension program. The OAS is a universal benefit paying about $540 to all who hit 65. In eleven years, that moves to 67. And it could be pushed off to 70.
In addition, wrinkly old people will be encouraged to defer taking this money, starting next year. The feds will bribe them 7.2% for each year they delay, for up to five years. So, if they wait until age 70, they’ll get a third more cash, which will last until they croak.
Why is this happening? Simple. This public pension thing costs a mint. Taxpayers now shell out $41 billion for the OAS, as well as a guaranteed income supplement (GIS) which gives another $700 a month to poor people. This tab increases by $2 billion a year. At the same time, the feds don’t raise enough taxes to run the country, which means they must issue IOUs (bonds). The shortfall has been as much as $40 billion lately – about exactly what the old geezers have been costing us.
The solutions are to raise taxes (ain’t gonna happen, yet), cut spending (F could barely find $5 billion to nip over three years in a $260 budget) or reduce entitlements (bingo!).
There’s also the issue of intergenerational pissing matches. With nine million boomers about to snorfle and suck their way through pension and health care billions over the next two decades, the country’s fiscal situation will grow only more dim. Many economists (like the Parliamentary Budget Officer, Kevin Page) believe we’re entering many years of a ‘structural deficit’ in which spending on these two items alone, thanks to demographics, will gut national finances. In other words, there aren’t enough working saps to pay for the retired ones.
How did this happen? Is it fair? Should we pay people just because they get old? Can we afford pensions and health care for everyone?
Beats me. But I know this. The very existence of these geezer benefits has lulled way too many people into doing diddly about their financial futures. I’ve given you the stats time and again. Half of us have no savings. The average RSP is big enough to last just six years. Four in ten have trouble paying monthly bills. Forty-three percent might fail a 2% mortgage hike. Eighty per cent of TFSAs are full of (yikes) cash. Debt’s endemic. But seven in ten have houses.
See what I mean? Nobody listens to me. Real estate beats retirement, ten times out of ten. Granite is irresistible, while it’s hard to get horny about growing old. And judging by a slew of comments on this lamentable site, w-a-y too many people believe they can actually get by on old fart pogey.
Of course, you can’t. Not in a city (where 80% of Canadians reside), regardless of whether you have a paid-for home or not. You might endure, but there will be little joy. Hardly the conclusion that life merits.
And now it promises to get a little worse. Two fewer years of government cheques.
This is the correct fiscal decision. No question. But it breaks a social contract. And the current government never mentioned the need to do this when elected a few months ago. Tacky and gutless.
But if leaders wanted us on a more sustainable path, they’d abandon policies pumping houses and stop pretending anyone can live on the geezer dole. F failed the test. There are millions of boomers who think they’ve played by the rules, now house-rich and investment-poor. Little do they know the revenge their real estate-deprived children will exact when the realization hits that they need to bail, because CPP and OAS are SOL.
No, it’s not the government’s fault. This is but a taste of what’s to come. Just wait til Parliament teems with Millennials.
Or, get ready now.