Response from the Ministry Office

RESPONSE FROM THE MINISTER’S OFFICE
The following is a response to a letter sent to the federal Ministry for Seniors:

On behalf of the Honourable Seamus O’Regan Jr., Minister of Labour and Seniors, I am responding to your email, which was forwarded by the office of the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance,  on February 14, 2024. You wrote about support for seniors.

Canada’s public pensions, namely the Old Age Security (OAS) program and the Canada Pension Plan (CPP) assist in providing income security to seniors. OAS benefits are intended to provide partial income security for seniors in recognition of the contributions that they have made to Canadian society and the economy. The benefits under the OAS program include the basic pension, which is paid to all persons aged 65 or over who meet the residence requirements, the Guaranteed Income Supplement (GIS) for low-income seniors, and the Allowances for low-income Canadians aged 60 to 64 who are the spouses or common-law partners of GIS recipients, or who are widows or widowers. 

OAS pensioners who receive little or no income, other than the OAS pension, are eligible for additional assistance through the GIS. The GIS is income tested to ensure that this additional assistance is provided to those seniors most in need.

The CPP is a social insurance program funded by the contributions of employees, employers and self-employed persons, and by the revenue earned on CPP investments. It covers virtually all employed and self-employed persons in Canada, excluding Quebec, which operates its own comprehensive plan, the Québec Pension Plan (QPP). The intent of the CPP is to provide contributors and their families with basic income replacement upon the retirement, disability or death of a wage earner. 

Generally speaking, the more a person earns and contributes to the CPP over his or her working years, the higher the future pension will be. In other words, the retirement pension is based on how much and how long a person contributes to the Plan, as well as the age at which he or she chooses to begin receiving the pension. 

OAS and CPP benefits are not intended to meet all the retirement income needs of seniors. They provide a base upon which individuals can add income from other sources, such as employer-sponsored pension plans, personal registered retirement savings plans, tax-free savings accounts, as well as other personal savings and investments, to address their particular financial circumstances.

The Government of Canada recognizes the many challenges faced by seniors due to the cost of living. That is why, to ensure that they retain their value over time and to protect the purchasing power of beneficiaries, OAS and CPP benefits are adjusted in accordance with changes in the Consumer Price Index (CPI). The CPI measures the price of a collection of foundational goods and services, such as food, shelter, gas and clothing, commonly purchased by Canadian households. The collection includes approximately 600 items and is the most accurate reflection of the national cost of living.

OAS benefits are adjusted four times per year, in January, April, July and October. Quarterly indexation allows for rapid adjustments of OAS benefit amounts following cost of living increases. In January 2024, the maximum OAS pension for seniors aged 65 to 74 increased by $5.66, from $707.68 to $713.34. This represents an increase of 0.8% from the October to December 2023 benefit amounts. Because the OAS pension is indexed quarterly, benefit increases may look small, depending on the rate of inflation over the previous quarter. However, when the change in the inflation rate is taken into consideration over the course of a year, the increase is actually larger. For instance, OAS benefits have increased by 3.75% over the past year (from January 2023 to January 2024).

CPP benefits, on the other hand, are adjusted annually each January based on estimates of inflation for one year. CPP benefits in pay were increased by 4.4% in January 2024 from their 2023 levels, based on the difference between the CPI from November 2021 to October 2022, and the CPI from November 2022 to October 2023.

Moreover, the Old Age Security Act and the Canada Pension Plan each contain a guarantee ensuring that benefits can never be reduced, even in the event of a decline in the CPI. Should the average cost of living decrease, OAS benefit amounts stay at the same level as during the previous three-month period and CPP benefit amounts stay at the same level as during the previous year.

Should you wish to read a more detailed explanation of how indexation is calculated, I invite you to visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html. 

The Government has undertaken significant action to improve the well‑being of seniors and continues to seek ways to address their needs. Since 2016, the federal government has:

– Restored the age of eligibility for the OAS pension and GIS back to age 65 from 67, providing financial security to those aged 65 and 66 and preventing about 100,000 future seniors from falling into poverty;
– Increased the OAS pension by 10% for seniors aged 75 and over as of July 2022, which has provided additional benefits of over $800 to full pensioners in the first year; 
– Provided $6 billion over 10 years to provinces and territories for the delivery of home care services for seniors who want to continue to live at home;
– Allocated $13 billion over five years to implement the Canadian Dental Care Plan, which will help ease financial barriers to accessing oral health care for up to an estimated nine million Canadian residents, starting with applications for seniors aged 87 years and above in December 2023, and from January to May 2024 for seniors of other age groups;
– Provided a one-time payment in 2022-23 that doubled the GST credit, which put an average of $225 more in the pockets of seniors; and
– Put hundreds of dollars back in the pockets of seniors who need it most through the July 5, 2023, grocery rebate.

The OAS program and the CPP are part of an extensive network of income security programs in Canada. Individuals facing financial hardship can explore the possibility of receiving support from their province or territory of residence. For further information on programs and services for seniors, you may find the Canada Benefits website of interest. It includes a benefits finder function to identify programs, at all levels of government, that are most relevant to an individual’s situation. For more information, visit www.canadabenefits.gc.ca. 

I hope that this information is helpful. Thank you for writing.

Yours sincerely,

Kristen Underwood
Director General
Seniors and Pensions Policy Secretariat
Income Security and Social Development Branch
Employment and Social Development Canada

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