According to a Toronto Star commentary on June 14, Canada’s current pension policy is exacerbating intergenerational inequality, with more young people facing heavy pension and tax burdens, while the government’s largest expenditures are going to the wealthiest elderly in the country.
Originally intended to prevent poverty in old age, pension funds are now largely flowing to wealthy seniors.
Why is the pension policy being criticized as “unfair”?
The commentary points out that the most controversial aspect is the Old Age Security (OAS). The OAS is not accumulated through individual or employer contributions but rather funded by national taxes. Under current policy, individuals with an annual income of $148,451 (aged 65-74) or $154,196 (aged 75 and older) are still eligible to receive the full amount of their retirement pension.
Even couples with an annual income of $181,994 (aged 65-74) or $308,392 (aged 75 and older) are only eligible for a partial retirement pension. The income test only begins when an individual’s annual income exceeds $90,997; asset levels and actual retirement status do not affect eligibility.
In contrast, the Canada Child Benefit begins to decline at a family income of $37,487 and is eliminated at $250,000. Meanwhile, nearly one-fifth of children under six live below the poverty line, and poverty is worsening. The welfare benefits for the elderly are increasing the burden on the younger generation.
The article argues that OAS was established to address widespread poverty among the elderly. However, in Canada today, those aged 65 and over are among the wealthiest in the country, with many earning far more than younger adults.
While some seniors still face hardship, the massive government spending has ironically led to the neglect of younger people in need. With the federal debt projected to surpass C$3 trillion within the next five years, every pension payment flowing to wealthy seniors is being squeezed out of other social programs.
The author urges the government to cut benefits for wealthy seniors as soon as possible and allocate more resources to younger families to prevent the continued worsening of intergenerational inequality.
A future pension crisis is looming, making institutional reforms imperative.
Commentators warn that the current favourable retirement conditions enjoyed by the baby boomer generation may be merely a historical anomaly. With soaring housing and asset prices, economic volatility impacting young workers, and the decline of traditional employer-sponsored pension plans, it will be difficult for younger generations in Canada to replicate the path of “mortgage retirement” or long-term stable employment.
The cost of retirement is likely to rise sharply in the future, while investment and savings capacity is declining. To avoid large-scale poverty among the elderly in 30-40 years, the government must not only reform OAS and welfare distribution but also redesign pension savings tools and incentive mechanisms to create sustainable retirement security for young people.