Ahead of the 2025 federal budget to be released this fall, some are raising a question that could be a third rail in Canadian politics: is it time to reform the Old Age Security program?
The founder of Generation Squeeze, which is a charitable “think and change tank” with a mandate to “champion generational fairness,” is urging the federal government to do just that and change up the retirement benefit, the cost of which is expected to soar over coming decades.
“OAS is the single largest growing part of the federal budget, and part of that reflects large subsidies for retirees with (combined) household incomes of $180,000. The $42 billion government deficit in 2025 was projected in the last fall economic statement, and it will now be much higher because of tax cuts and new NATO promises,” says Paul Kershaw, also a professor at University of British Columbia.
“You could spend our OAS money differently right now and achieve other goals without having to raise taxes. And you could do so, for instance, by asking more financially secure retirees to take slightly less.”
Generation Squeeze made the case in the group’s submission to the budget consultation process.
That’s where the federal government takes input and recommendations from stakeholders across the country on what should — or should not — be in the budget.
In addition to paying down the deficit, the group adds that trimming the amount given out through Old Age Security could be put towards economic supports for many Canadians living in poverty as the rising cost of living leads to more cases of personal debt, with those most impacted including young Canadians and lower-income retirees.
This may involve smaller payments made to more affluent retirees in order to free up more money for younger and/or lower-income Canadians to receive more funding and social supports.
But first … what is Old Age Security?
There are two main federal government retirement pensions in Canada: the Canadian Pension Plan (CPP), and the Old Age Security program (OAS).
While the CPP is based on contributions made by an individual and their employer while working in Canada, the OAS is funded by all tax revenues and paid out by the government based on how long an individual has lived in Canada after the age of 18.
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According to actuarial data from the Office of the Chief Actuary, the costs of the program are set to soar over the next four decades as baby boomers age “from an estimated $77.8 billion in 2023 to $136.6 billion in 2035 and $276.5 billion by 2060.”
“OAS is the largest line item in the federal budget. Fully one-fifth of all federal spending goes to OAS, and this amount is growing faster than most other expenditures put together,” Generation Squeeze says on its website.
Currently, the OAS pays individual retirees aged 65-74 up to $727.67 per month, provided their annual income in 2024 fell below a threshold of $148,451.
For those aged 75 and over, the threshold increases to $154,196 and the monthly payments go up to $800.44.
An individual would receive no OAS payments if their annual income exceeds the threshold amounts listed.
Some of those payments may be reduced, or “clawed back” in the form of a recovery tax if annual incomes exceed $90,997 for an individual in 2024 or about $180,000 for a couple, but are still less than the maximum threshold incomes for each person.
Generation Squeeze said in their budget submission that the entire OAS program is long overdue for changes.
“Canada’s Old Age Security program desperately needs an overhaul. It hasn’t been updated since its creation in 1952, even though it now accounts for about one-fifth of the federal budget,” the report says.
The auditor general also launched a review in 2024 into programs to assist seniors, including the OAS, which it says cost the federal government over $60 billion in 2020.
“The payments and costs (for OAS) are projected to triple by 2045. This increase was projected not only because of the increasing number of seniors but also because of inflationary pressures,” the auditor general report said.
Generation Squeeze says that by reducing the amount OAS pays out to retired couples making over $100,000 by approximately $3,200, that could free up $36 billion in savings over five years.
They want to see the federal government use those savings to spend more specifically on low-income seniors, affordable housing and post-secondary education, and a 50-per cent investment in affordable child care, as well as paying down the government’s debt.
Generation Squeeze adds that the plan is a “win-win-win” that will help Canada to balance its books and support Canadians as it responds to “threats,” including tariffs imposed by United States President Donald Trump’s administration.
Global News reached out to Finance Minister Francois-Philippe Champagne for comment on if changes to the OAS were being considered for the upcoming fall budget.
In response, the minister’s office issued a statement saying: “The Government of Canada is engaging in pre-budget consultations with stakeholders and partners across the country, including ones with a focus on support for seniors. Their ideas and submissions will help guide Budget 2025.”
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