Income and claw backs | General financial discussion | Discussion forum

I agree clawback should be a non-issue. It does not start until over $78,000 taxable income per individual, an amount that provides for a generous retirement.

OAS is really a social net and should be called Old Age Support. Government does itself a disservice calling it a pension (various gov't publications, including the Service Canada site, call it Old Age Security Pension). It is not a pension because it has not really been earned on an individual basis like CPP or a DB or a DC or a RSP. C'est la vie.

How about Old Age Supplement... keeping in the theme of the GIS?

The program is a mess anyway. Rather than increasing age eligibility, they should have dropped the clawback thresholds considerably, e.g. $50k the start of clawback and perhaps $80k for full clawback. Or if the gov't has no balls to tackle clawbacks driectly, stop indexing and in 10-15 years the clawbacks would move down in 'real dollars'.

Most, or perhaps, many Canadians do not need to apply for OAS if they have an account with Service Canada and/or have previously made the CPP application process. They use that data to determine eligibility.

Loonie said

AltaRed, one does still have to apply for OAS, although it is in most cases a very simply process. I just wanted to add this as a lot of people apparently forget to apply or don't realize they have to.

We have all paid into OAS on the assumption that we would get it when we reached the age. Those who are in their 60s or older were told this from the time they were young. In that sense, it seems unfair to change the rules to claw it back etc.

In my case, I got a letter from Service Canada where they listed the stats they had on me and said that unless something was wrong with their assumptions, I needed to do nothing...that I would get OAS on schedule. So I did not have to apply. That situation may not be typical.

Regarding OAS itself, technically none of us have pre-paid into our own OAS. OAS comes out of General Revenue, i.e. current budget each fiscal year. We have all paid to support what every recipient gets year by year, but we never pre-pay into a fund that comes back to us at a later time. There is only a sense of obligation on the government's part since it would be unfair for us to have paid to support all those recipients that have gone before us for the last 40 or so years and then be left high and dry when we come of age. That said, at some time, the music has to stop or at least be tuned back. The easiest way (and perhaps fairest way) to taper back would be to stop indexing for a long period of time.

SD2013 said

AltaRed, so scrap OAS and give everyone with a low income welfare, social assistance. Are you sure they don't give them both or there is some other benefits that we do not know about besides GIS?
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I am just saying OAS should be treated the same way as GIS. Call it Old Age Supplement... and apply it on a similar basis GIS is applied for. Then it would be rightfully seen as a request for social welfare and that would cut back on the whining from 'wealthy' seniors. We don't hear seniors whining about GIS.

Seniors currently getting CPP (to varying degrees or not) and OAS (to varying degrees or not) can also apply for GIS if their income is low enough. I have no qualms about GIS because at that level of income, it is poverty line anyway.

This is getting to be a very hot topic!

I just wanted to weigh in on the proposed Ontario Pension Plan and any other govt-mandated pension plans that are going to cost us more in payroll deductions.

We have a problem nation-wide where many seniors do not have enough income and are therefore receiving handouts under various names from govt. Everyone who pays taxes is helping to pay for this, one way or another.

I think what the governments are trying to do in beefing up pension plans is to ensure that peoples' retirements are self-funded as much as possible and therefore that they do not get handouts that taxpayers fund. I think this is a good motivation.

The question, as always, is how best to accomplish this. I am in favour of requiring people to contribute to pension plans that will fully fund their retirement to keep them above the poverty level and able to look after their health and safety needs in their old age, and I support the intentions of the Canada Health Act. The question is how best to structure this.

I'm also in favour of increasing the minimum wage to the point where people can actually fund said pension plans.

What I'm not in favour of is people who squander their money on what I consider luxuries (expensive cars and toys, expensive and frequent vacations, junk which does not contribute value to their lives, buying sprees, etc.), acquiring massive credit card debt with high interest rates, and then need bailouts from the rest of us. Mandatory pension plans are one way of making these kinds of purchases more difficult. Taxing the purchases more heavily is another.

I have lived and spent fairly conservatively all my life, and have avoided debt like the plague except for mortgage. It may sound like sour grapes, but, yes, it annoys me greatly when people who have squandered their money are getting free money from the public purse in their old age. (And, yes, I really do know such people personally who are now getting GIS etc. In addition, the next generation of these people are often featured on the Gail van Oxlade TV show whose name I don't remember, where they are typically carrying massive credit card debt in the 10s of 1000s and have nothing much to show for it.) I don't think cutting off the seniors makes sense, as that would be cruel at this stage of life, and they can't go back and re-do their lives to save more money. But we must find some way to insist, in future, that people are responsible for putting away money for their retirements, where it can't be accessed prematurely. If everyone is entitled to a living wage, then this should be possible. Otherwise, we all end up paying for it indefinitely. The larger the pension plan, the more efficient it is to operate, hence CPP etc. are relatively good value when you factor in the spread in age of death. Thus, pension plans have a certain advantage over everyone funding their own individual plan exclusively, and there is a role for them as a piece of the pie.

My concern with any government-sponsored or employer-sponsored pension plan is the question of who controls it and where it is invested. If you were ever looking for an argument as to why you should put your money in high-interest savings or equivalent, look no further than the detailed reports of your pension plans, CPP included. They are all heavily invested in the stock market etc., and you have absolutely no "say" in it. At the end of the year, you get to read what they did with the money and how well it fared.

Financial "advisors" usually advocate a "balanced portfolio" of stocks, bonds, GICs etc, in proportion to your age, but they rarely if ever take into account the fact that a good portion of your income sources is already skewed towards the stock market, and beyond your control. Hence, most if not all of what you do have control of ought reasonably not to go into the stock market etc. because the rest of your income is already coming from there whether you like it or not.

I don't think there are any fix-all answers. I find this issue really complicated. The only thing I can say for sure is that people need to be paid well enough, at any job, to be able to live above poverty and save a little. Otherwise, they will be needing supplements from the rest of us. Second, we must all be required to save for our old age, one way or another.
And if McDonald's or WalMart or whomever can't "afford" to pay people a living wage out of their massive profits, then they should close up shop and/or we shouldn't patronize them. There is no reason why we, the taxpayers, should be in effect paying for what these companies refuse to pay for, by supplementing people's wages from the public purse through "welfare" in their senior years, as it means we are effectively subsidizing corporate profits and stock market success. Make sure people are paid a living wage now, have a mandatory pension contribution system of some sort, details to be worked out, and you shouldn't have to subsidize them later.