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

Why did Old Age Security (OAS) benefits not increase in April 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 rapid 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. This is what happened in April 2025.

• Based on the Consumer Price Index, Old Age Security benefits will increase by 1% in July 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 August 2024, September 2024 and October 2024 was equal to 161.6. The average CPI for November 2024, December 2024 and January 2025 was equal to 161.4 (a decrease of 0.2). As the CPI did not increase beyond its previous peak, OAS benefits remained unchanged for the April to June 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 April 2024 to April 2025. The next review will be in July 2025. Based on changes to the CPI, OAS benefit amounts will increase by 1.0%.

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.

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 August to October 2024 period was 161.6, while the average Consumer Price Index for the November 2024 to January 2025 period was 161.4, a decrease of 0.2.

• However, as the average Consumer Price Index for February to April 2025, 163.3, increased beyond its previous peak, benefits will increase in July 2025.

• On an annual basis, OAS benefits will have increased by 2.0% from April 2024 to April 2025, and by 2.3% from July 2024 to July 2025.