Question Period Note: 16th ACTUARIAL REPORT ON THE OLD AGE SECURITY PROGRAM

The 16th Actuarial Report on the Old Age Security (OAS) program as at December 31, 2018 has been recently tabled in Parliament. The Report’s key findings show that the number of OAS pension beneficiaries is projected to rise significantly over the next fifteen years. How confident is your Government that the OAS program will be there for Canadians in the future?

• The Old Age Security program has been supporting Canada’s seniors for nearly 70 years, and will continue to be there for Canadians in the years to come.
• I recently tabled the Chief Actuary’s 16th Actuarial Report on the Old Age Security program in the House of Commons. The Report shows that as our population ages, the number of Old Age Security pension beneficiaries is projected to rise by 53% over the next fifteen years, growing from 6.6 million in 2020 to 10.1 million in 2035.
• The Chief Actuary projects that the ratio of Old Age Security program expenditures to the GDP will increase from 2.77% in 2020, to a high of 3.1% between 2030 and 2037. After 2037, this ratio is expected to gradually decrease to 2.63% by 2060, which is comparable to the historical levels of the early 1990s.
• Canadians can be very confident in the cost estimates of the Chief Actuary. Historically, the projections provided in previous Reports have been very close to the actual expenditures, which confirm the reliability of these projections.

The Public Pensions Reporting Act requires a triennial Actuarial Report on benefits under the Old Age Security Act to be provided every three years.

The 16th Actuarial Report on the Old Age Security (OAS) program as at December 31, 2018 presents the results of an actuarial examination of the status of the OAS program based on data and projections as of December 31, 2018, and includes projections up to the year 2060.

The 15th Actuarial Report, as at December 31, 2015, was not a triennial report. It was a supplement to the previous triennial report – the 14th Report. As a result, the 16th Report updates the demographic and economic assumptions for the OAS program from the 14th Report, most notably taking into account the impacts of the COVID-19 pandemic, and the enhancement to the income exemption for the GIS and the Allowances.

As under the previous reports, the overall financial projections take into account the ageing of the Canadian population, including Canada’s baby boomers, based on projected fertility and mortality rates as well as continual increases in life expectancies.

Major Findings

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 3.3 in 2020 to 2.0 in 2060.

Mainly due to the retirement of the baby boom generation, the number of OAS pension beneficiaries is projected to increase from 6.6 million in 2020 to 10.1 million by 2035 - an increase of 53%. Thereafter, growth in the number of beneficiaries is expected to slow down. By 2060, the number of OAS basic pension beneficiaries is projected to reach 12.7 million. This means that annual OAS pension expenditures will increase from $46.5 billion in 2020 to $94.3 billion in 2035, and $195.5 billion by 2060.

The number of Guaranteed Income Supplement (GIS) and Allowances beneficiaries is projected to increase by 52% over the same period, from 2.3 million in 2020 to 3.5 million by 2035.

The proportion of seniors receiving GIS is projected to increase from 32.3% in 2020 to 33.1% by 2035 and then slowly decrease to 26.3% by 2060.

Total annual OAS program expenditures are projected to increase from $60.8 billion in 2020 to $123.4 billion in 2035 and $243.4 billion by 2060.

The ratio of program expenditures to the Gross Domestic Product (GDP) is projected to be 2.77% in 2020 compared to 2.50% in 2019. This substantial year-over-year increase is mainly due to the estimated negative impact of COVID-19 on the GDP.

Thereafter, this ratio is projected to reach a high of 3.1% between 2030 and 2037. After 2037, the ratio of expenditures to GDP is projected to gradually decrease to a level of 2.63% by 2060, which is comparable to the historical levels of the early 1990s. This reduction is mainly attributable to expected slower growth in inflation, to which OAS benefits are indexed, compared to growth in wages and GDP as well as to increases in additional Canada Pension Plan and QPP benefits.

The projected increase in expenditures, as well as the ratio of expenditures to GDP, take into account the increase to the GIS earnings exemption as well as the economic impact of the COVID-19 pandemic. However, the projections do not take into account the potential impact of commitments which have not yet been implemented.

Historically, the projections provided in previous Reports have been very close to the actual expenditures, which confirm the reliability of these projections. For example, the 14th Actuarial Report projected expenditures of $156.6 billion for the period 2016 to 2018. This was less than 0.1% higher than actual expenditures.

In addition, the findings of the 16th Actuarial Report are largely consistent with those of previous reports. For example, the 15th Actuarial Report projected that the ratio of program expenditures to GDP would be 2.65% by 2060, which is comparable to the 16th Report’s projection of 2.63%.

• The Public Pensions Reporting Act requires a triennial Actuarial Report on benefits under the Old Age Security Act to be provided every three years.
• The 16th Report updates the demographic and economic assumptions for the OAS program from the 14th Report, most notably taking into account the impacts of the COVID-19 pandemic, and the enhancement to the earnings exemption for the Guaranteed Income Supplement and the Allowances.