Question Period Note: INDEXATION OF OLD AGE SECURITY BENEFITS IN JANUARY 2025

Why are Old Age Security (OAS) benefits not increasing in January 2025, in line with changes to the cost of living?

• Old Age Security benefits are adjusted quarterly in accordance with changes in the Consumer Price Index.

• Quarterly indexation allows for faster adjustment of Old Age Security benefit amounts.

• The Old Age Security Act guarantees that benefits can never be reduced. In the event of a decline in the Consumer Price Index, Old Age Security benefit amounts stay at the same level as during the previous quarter.

• As the Consumer Price Index declined slightly over the most recent quarter, Old Age Security benefits will stay at the same level in January 2025 until the next review in April 2025.

• However, due to indexation over the past year, Old Age Security benefits will have increased by 2.0% between January 2024 and January 2025.

The indexation of Old Age Security (OAS) benefits is legislated under the Old Age Security Act. Increases are made to all benefits under the OAS program, including the OAS pension, the Guaranteed Income Supplement (GIS) and the Allowances. They are calculated four times per year in January, April, July and October, using the All-Items Consumer Price Index (CPI). Quarterly indexation allows for rapid adjustments of OAS benefit amounts following cost of living increases.

The CPI measures the price of a collection of foundational goods and services commonly purchased by Canadian households. The collection includes approximately 600 items and is the most accurate reflection of the national cost of living. Statistics Canada is currently using 2002 as the base year, in which the CPI was equal to 100.

OAS benefit adjustments closely follow the CPI, except when the CPI goes down (in which case OAS benefits stay at the same level). The OAS rate increase is the percentage change between the average of the most recent three-month CPI period and that of the last three-month CPI period in which OAS amounts increased.

The average CPI for May 2024, June 2024 and July 2024 was equal to 161.7. The average CPI for August 2024, September 2024 and October 2024 was equal to 161.6 (a decrease of 0.1). As the CPI did not increase over the previous three-month period, OAS benefits remain unchanged for the January to March 2025 quarter.

It is not unusual that OAS benefits remain at the same level as a result of a decline in the average three-month CPI. OAS benefits stayed at the same level for three quarters in 2020 and more recently in the April to June 2024 quarter.

OAS benefits have increased by 2.0% over the past year, from January 2024 to January 2025. The next review will be in April 2025.

To date, the Government has undertaken several measures to improve the financial security of low-income seniors. Since 2016, the Government has:
o increased the GIS top-up for the lowest-income single seniors by up to $947 annually, helping close to 900,000 seniors who rely almost exclusively on the OAS pension and the GIS;
o restored the age of eligibility for the OAS pension and the GIS to 65 from 67, preventing about 100,000 future seniors from falling into poverty;
o increased the GIS Earnings Exemption from $3,500 to $5,000, extended the exemption to self-employment income, and introduced an additional 50% exemption on employment and self-employment income between $5,000 and $15,000, starting in July 2020. This measure enables working GIS recipients to earn up to $15,000 in employment and self-employment income before the GIS benefit reduction applies to their full income;
o introduced a permanent 10% increase to the OAS pension for seniors aged 75 and over, which started in July 2022.

IF PRESSED (Indexation calculations)

• The quarterly adjustment for all Old Age Security benefits is based on the difference between the average Consumer Price Index for two periods of three months each.

• The average Consumer Price Index for the May to July 2024 period was 161.7, while the average Consumer Price Index for the August to October period was 161.6.

• The difference between the two periods is a decrease of 0.1.

• When the Consumer Price Index exceeds its last peak, benefits will be adjusted accordingly.