Recent changes to the federal Old Age Security (OAS) program, including two one-time extra payments of $500, and a plan to increase the program’s payout by 10 per cent for those 75 and over, shouldn’t impact Ottawa’s ability to sustain the program.

So says Sheila Block, chief economist for the Canadian Centre for Policy Alternatives (CCPA), Ontario branch.

On the phone to Save with SPP from Toronto, Block notes that unlike the Canada Pension Plan (CPP), OAS isn’t funding through contributions and investment returns like a private pension plan – it’s a government program, paid for through taxation. So, she says, if planned changes go ahead there is “absolutely… the capacity for the government to afford it.”

While OAS is a fairly modest benefit, currently about $615.37 per month maximum, Block notes that it has an important feature – it is indexed, meaning that it is increased to reflect inflation every year.

“This acknowledges that a lot of retirees’ pension plans are not indexed,” she explains, or that they are living on savings which diminish as they age. An indexed benefit retains its value over time.

Many people who lack a workplace pension and/or retirement savings will receive not only the OAS, but also the Guaranteed Income Supplement (GIS), which is also a government retirement income program. OAS and GIS together provide about $16,000 a year, which is helpful in fighting poverty among those with lower incomes, she explains.

“OAS was not designed to support people on its own,” she explains. “And the GIS is an anti-poverty measure that supplements OAS. As we see fewer people with defined benefit pensions or adequate retirement savings, there is an argument to increase OAS, for sure.” But, she reiterates, the OAS is more of a supplement than it is a program designed to provide full support.

As well, she notes, many getting OAS and GIS also get some or all of the CPP’s benefits.

Save with SPP noted that much is made about the OAS clawback in retirement-related media reports. But, Block notes, in reality, the threshold for clawbacks is quite high. The OAS “recovery tax” begins if an individual’s income is more than about $78,000 per year, and you become ineligible for OAS if your income exceeds about $126,000, she says.

A 2012 research paper by CCPA’s Monica Townson, which made the case then that OAS was sustainable, noted that only about six per cent of OAS payments were clawed back.

Citing data from the Canada Revenue Agency, Block notes that today, only about 4.4 per cent of OAS payments are “recovered” through the recovery tax.

We thank Sheila Block for taking the time to talk with Save with SPP.

Retirement security has traditionally depended on three pillars – government programs, like CPP and OAS, personal savings, and workplace retirement programs. If you don’t have a workplace pension plan, you’re effectively shouldering two of those pillars on your own.

A program that may be of interest is the Saskatchewan Pension Plan. This is an open defined contribution program with a voluntary contribution rate. You can contribute up to $6,600 per year, and can transfer up to $10,000 from your registered retirement savings plan to SPP. They’ll invest the contributions for you, and when it’s time to retire, can help you convert your savings to income, including via lifetime annuity options. Check them out today!

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As the leaves change colours and we gear up for the busy fall and winter season, it’s time to check in on what some of our favourite personal finance writers have been discussing this summer.

With the announcement that CIBC has gobbled up PC Financial which will be rebranded as CIBC Simplii Financial on November 1^st, Stephen Weyman says on Howtosavemoney.ca that it will be banking as usual in the short term but you can expect CIBC to sneak in a few fees here and there to make sure they’re profitable and try to cut costs where they can.

On Boomer & Echo, Marie Engen offers 25 money saving tips. A couple of my favourites are:

• Turn off the “heat dry” on your dishwasher. Open the door when the cycle is done and let the dishes air dry.
• Learn some sewing basics so you can make minor repairs and alterations to your clothing – hem your pants and skirts, sew on a button, sew up a torn seam, put in a new zipper.
• Buy some time. Set aside the purchase you are considering for a few hours (or a day or two) before you decide whether to buy it. Often you may decide you can easily live without it.

Bridget Casey (Money After Graduation) has recently welcomed a new daughter and she is already thinking about saving for her college education. She writes about the importance of setting up your child’s Registered Educational Savings Plan as a trust so it will be covered by the Canada Deposit Insurance Corporation in the event of financial institution failure up to $100,000 per account.

Retire Happy’s Jim Yih writes a thoughtful piece on Minimizing Your Old Age Security Clawback. The maximum monthly OAS benefit in 2017 is $578.53 ($6,942.36 annually). If you earn between $74,788 and $121,070/year the OAS benefit will be clawed back. He explains that with pension splitting, spouses can give up to 50% of their pension income to their spouse for tax splitting purposes. This is a very effective way to reduce income if you are close to the OAS clawback threshold.

When Sean Cooper, author of Burn Your Mortgage paid off his mortgage, he promised himself he’d stop putting off travel. His first major trip was to San Francisco this summer. Nevertheless, he still travelled frugally booking his $700 roundtrip flight through PC Travel. He also got from the airport to downtown on Bay area rapid transit for less than $10. In San Diego, he opted for a four-bed mixed dorm room at USA Hostels for less than $60 a night as opposed to $200/night in a hotel.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.