Evaluation of the Old Age Security program: Phase 2

On this page

• List of acronyms
• List of figures
• List of tables
• Introduction
  • Program description
  • Evaluation context
  • The Old Age Security pension and the Guaranteed Income Supplement contribute to reducing poverty in Canada
• Rationale for the Allowances and profile of recipients
  • Conclusions on the Allowances
• Deferral of the Old Age Security pension
  • Conclusions on Old Age Security deferral
• Management response and action plan
  • Overall management response
• Annex 1: Old Age Security program description
  • Old Age Security pension
  • Guaranteed Income Supplement
  • The Allowances: Allowance (spousal) and the Allowance for the Survivor
• Annex 2: Key findings of phase 1 of the evaluation
  • Recommendation
• Annex 3: Evaluation questions
  • Evaluation questions
  • Evaluation question
• Annex 4: Limitations and summary of studies to support phase 2 of the evaluation
• Annex 5: References

List of acronyms

• CPP: Canada Pension Plan
• C/QPP: Canada or Quebec Pension Plan
• ESDC: Employment and Social Development Canada
• GIS: Guaranteed Income Supplement
• ISSD: Income Security and Social Development branch
• LICO: Low Income Cut-Off
• PASRB: Public Affairs and Stakeholder Relations Branch
• OAS: Old Age Security
• RRSP: Registered Retirement Savings Plan

List of figures

• Figure 1: Proportion of near-seniors receiving the Allowances
• Figure 2: Sources of total income of the recipients of the Allowance for the Survivor in 2016, by income range
• Figure 3: Sources of total family income of the recipients of the Allowance in 2016, by income range
• Figure 4: 2016 recipients of the Allowances
• Figure 5: Number of seniors receiving a deferred OAS pension (2014 to 2018)
• Figure 6: Distribution of lengths of deferral among 2013 cohort who received a deferred OAS pension in 2018
• Figure 7: Proportion of the 2013 cohort employed in 2013 to 2016 (%)
• Figure 8: Average individual income (in 2016 dollars) of the 2013 cohort in 2013 to 2016

List of tables

• Table 1: Single near-seniors with income below the Allowance for the Survivor threshold
• Table 2: Married near-seniors with income below the Allowance threshold
• Table 3: Income distribution of the 2013 cohort during deferral of their OAS pension

Alternate formats

Introduction

Rationale for the Allowances and profile of recipients

The Allowances were introduced to help alleviate financial difficulties of near-senior spouses of seniors, and then extended to widows and widowers.

1975: Introduction of the Allowance. 30% of married women participated in the labour market in 1970^{Footnote 6}. Before the introduction of the Allowance, retirement of the husband led some couples to live on a single OAS/GIS benefit, as only 1 spouse had the age requirement to qualify for the OAS benefits.

1978: Extension of Allowance eligibility to widows and widowers to include the 6-month period following the death of the OAS pension recipient.

This was to recognize the difficult circumstances some near-senior spouses could face when their older spouse passes away (including losing their Allowance benefits and the OAS benefits of their spouse).

1979: Extension of Allowance eligibility to widows and widowers: 6-month limit was extended to continue until age 65 or remarriage, whichever came first.

1985: Extension of the Allowance eligibility to widows and widowers: Allowance for the Survivor was introduced for all near-senior widows and widowers.

Parliament raised concerns about the financial situation of many near-seniors, particularly single women, but it was too costly to expand the eligibility of the Allowance to all near-seniors.

Widows' vulnerability was highlighted:

• most had been financial dependents for most of their lives
• societal norms encouraged them to perform only unpaid roles (mother, housekeeper, community worker, etcetera)
• many would have difficulty finding paid work at the time

2019: The spousal Allowance was introduced in 1975. Since that time, the participation rate of women in the labour market has doubled (64% of married women participated in the labour market in 2018 versus 30% in 1970^{Footnote 7}). This trend is likely to continue.

Recipients of the Allowances represent a small proportion of all near-seniors but a significant share of near-senior widows and spouses of seniors.

In 2016, recipients of the Allowances represented:

• 3% of all near-seniors (78,810 recipients)
• 22% of near-senior widows or widowers (24,900 recipients)
• 13% of near-senior spouses of seniors (53,910 recipients)

These proportions have been decreasing, as income^{Footnote 8} among near-seniors has increased.

Text description of Figure 1

Figure 1: Proportion of near-seniors receiving the Allowances

Year	Widows or widowers	Spouses of seniors	All near-seniors
1998	32.2%	25.5%	8.1%
1999	31.8%	25.0%	7.9%
2000	31.0%	23.8%	7.4%
2001	29.4%	23.5%	7.0%
2002	30.2%	23.6%	6.9%
2003	29.5%	22.9%	6.6%
2004	30.9%	23.5%	6.6%
2005	29.5%	22.5%	6.2%
2006	29.3%	22.6%	6.0%
2007	27.5%	20.9%	5.5%
2008	28.0%	19.6%	5.2%
2009	25.6%	18.5%	4.8%
2010	26.7%	18.4%	4.8%
2011	24.2%	17.5%	4.5%
2012	25.2%	16.9%	4.5%
2013	22.1%	15.8%	4.1%
2014	23.0%	14.8%	3.9%
2015	20.5%	13.7%	3.5%
2016	22.2%	13.1%	3.5%

Source: 10% sample of the T1 file from the Canada Revenue Agency.

80% of near-senior spouses of seniors and widows/widowers are women, half were working in 2016.

Most recipients of the Allowances had very low incomes, low levels of education, and were women.

Income distribution of recipients of the Allowance for the Survivor in 2016^{Footnote 9}:

• 44% of recipients had income below $18,000
• 29% had income between $18,000 and $25,000
• 27% had income above $25,000^{Footnote 10}

Since 1998, the average real income of recipients has increased (from $20,000 in 1998 to $24,000 in 2016)^{Footnote 11 Footnote 12}

Income distribution of recipients of the Allowance (spousal) in 2016^{Footnote 13}:

• 41% of recipients had family income below $30,000
• 33% had family income between $30,000 and $40,000
• 25% had family income above $40,000^{Footnote 14}

Since 1998, the average real family income of recipients has increased (from $33,000 in 1998 to $37,000 in 2016)^{Footnote 15 Footnote 16}

Gender of recipients of the Allowance for the Survivor in 2016:

• 87% of recipients were women^{Footnote 17}

Gender of recipients of the Allowance (spousal) in 2016:

• 89% of recipients were women^{Footnote 18}

Education of recipients of the Allowance for the Survivor in 2016^{Footnote 19}:

• 41% of recipients had less than a high school degree
• 30% with only a high school degree
• 29% with other degrees

Education of recipients of the Allowance (spousal) in 2016^{Footnote 20}:

• 37% of recipients had less than a high school degree
• 32% had only a high school degree
• 30% had other degrees

Due to the lack of 2016 data for the Market Basket Measure at the time of analysis (early 2018), 2016 before-tax LICO was used to present the incidence of low income.

Allowance for the Survivor benefits account for a significant share of the income of most recipients.

In 2016, Allowance for the Survivor recipients with income below $18,000 relied mainly on Allowance benefits (representing 60% of income for the average recipient) and C/QPP benefits (35%) as their sources of income.

For recipients with income between $18,000 and $25,000, Allowance and C/QPP benefits represented together about 70% of their income, both with similar amounts.

For recipients with income above $25,000, Allowance benefits represented about 20% of their income.

Text description of Figure 2

Figure 2: Sources of total income of the recipients of the Allowance for the Survivor in 2016, by income range

Income range	Allowance benefits	Canada or Quebec Pension Plan	Other income
$0 to $17,999	59%	36%	4%
$18,000 to $24,999	33%	38%	29%
$25,000+	20%	19%	61%

Source: 10% sample of T1 file from the Canada Revenue Agency.

Note: Other income includes Registered Retirement Savings Plan (RRSP) withdrawals, employment income, other pension income (private pensions, annuities, Pooled Registered Pension Plans and Registered Retirement Income Funds withdrawals), and income from other sources.

The impact of the Allowance for the Survivor: benefits reduced the proportion under the after-tax LICO by 27 percentage points (from 53% to 26% of recipients) in 2011^{Footnote 21}.

Allowance (spousal) and other OAS benefits account for a significant share of the family income of most recipients.

In 2016, recipients with family income under $30,000 relied mainly on OAS benefits (representing 75% of family income for the average recipient), including about a quarter of their income coming from Allowance benefits.

For beneficiaries with family income between $30,000 and $40,000, Allowance benefits represented about 15% of their income, with 45% of their income coming from OAS benefits (including the Allowance).

For beneficiaries with family income over $40,000, Allowance benefits represented only about 5% of their income.

Text description of Figure 3

Figure 3: Sources of total family income of the recipients of the Allowance in 2016, by income range

Income range	Allowance benefits	Canada or Quebec Pension Plan benefits of Allowance recipients	Spouse Old Age Security, Guaranteed Income Supplement	Other income
$0 to $29,999	28%	6%	45%	21%
$30,000 to $39,999	13%	10%	31%	46%
$40,000+	6%	6%	18%	69%

Source: 10% sample of T1 file from the Canada Revenue Agency.

Note: Other income includes RRSP withdrawals, employment income, other pension income (private pensions, annuities, Pooled Registered Pension Plans and Registered Retirement Income Funds withdrawals), and other individual or spousal income (excluding spousal OAS/GIS).

The impact of the Allowance: benefits reduced the proportion of recipients under the after-tax LICO by 11 percentage points (from 15% to 4% of recipients) in 2011^{Footnote 22}.

Most recipients of the Allowances did not have a significant attachment to the labour market, even at age 58 or 59.

• A quarter of all the recipients of the Allowances worked in 2016
• Half of the recipients of the Allowances worked when they were 58 or 59 years old
• Even among those who worked, employment income was already very limited at that age for most

Text description of Figure 4

25% of Allowances recipients worked in 2016. 50% of these recipients worked at age 58 or 59 and their average employment income was $15,000 (in 2016 dollars).

Source: 10% sample of T1 file from the Canada Revenue Agency.

The majority of low-income near-seniors are not eligible for the Allowances due to their marital status or the age of their spouse.

• In 2016, 600,000 near-seniors (or 27%) had income below the Allowances income qualifying thresholds^{Footnote 23}.
• About 450,000 (or 75%) of these individuals were near-seniors who did not have the marital status to qualify for the Allowances (they were not widowed or their spouse was younger than 65 years old)^{Footnote 24}.
• 275,000 (or 45%) of these near-seniors were single and not widowed, half of which were women^{Footnote 25}.
• 180,000 (or 30%) of these were near-seniors with spouses younger than 65 years old, a third of which were women^{Footnote 26}.

Low-income non-widowed single near-seniors had lower income, on average, than recipients of the Allowance for the Survivor^{Footnote 27}.

• Over two-thirds of low-income non-widowed single near-seniors had income below $18,000.
• These individuals' income was lower on average than the ones for the Allowance for the Survivor recipients, mainly because they did not receive the Allowance benefits.
• This was the case for both women and men.

The marital status requirement of the Allowance for the Survivor was challenged in Federal Court. The court ruled that the Charter of Rights does not require public pensions to provide the same benefits to everyone.

Low-income near-seniors with a spouse younger than 65 had lower income, on average, than recipients of the Allowance^{Footnote 28}.

Half of low-income near-seniors with spouses younger than 65 had family income below $30,000.

These near-seniors' family income was lower than the ones of the recipients of the Allowance, mainly because they did not receive Allowance benefits.

Even with a similar financial situation, all near-seniors do not receive the same financial support from the federal government as recipients of the Allowances do. However, individuals in this age group may be eligible for provincial or territorial assistance.

Deferral of the Old Age Security pension

Since 2013, seniors have the option to defer the start of their OAS pension by up to 5 years in exchange for a higher monthly payment.

The monthly OAS pension amount is increased by 0.6% for every month the OAS pension is deferred, up to a maximum of 36% (for delaying for 5 years), in addition to regular indexation of OAS benefits. The deferred pension amount is calculated on an actuarially neutral basis.

There are data lags when assessing the characteristics of those who defer their OAS pension.

• There is a 5-year data lag to identify all individuals that deferred in a cohort that reaches 65 years old. The data on the deferral decision is available only once the person starts receiving their OAS pension (or once their application is processed)
• Complete data on the first cohort of seniors who could have deferred for up to 5 years was available at the end of 2018. Partial data is available for younger cohorts

There is a limited number of seniors deferring their OAS pension, but it is rising.

In 2018, 60,000 seniors received a deferred OAS pension, up from 3,500 in 2014 and 30,000 in 2016.

Text description of Figure 5

Figure 5: Number of seniors receiving a deferred OAS pension (2014 to 2018)

Year	Number of seniors who deferred their Old Age Security pension
2014	3,500
2016	30,000
2018	60,000

Source: 10% sample of linked T1 and OAS administrative data.

4% of seniors in the first eligible cohort chose to defer their OAS pension (Employment and Social Development Canada [ESDC], 2019b). This is in line with projections from the Chief Actuary.

One of the reasons few people choose to defer their OAS pension is awareness. A 2018 departmental online survey found that awareness of OAS deferral was low, with 25% of 60 to 64-year-old respondents aware they could defer their OAS pension^{Footnote 29}.

The length of deferral chosen varies among individuals^{Footnote 30}.

Among seniors who deferred their OAS pension, the length of deferral was 23 months on average.

A third of seniors deferring did so for a year or less and over 60% for 2 years or less. Another 20% deferred for 2 to 3 years, while the remaining 20% deferred for more than 3 years.

Text description of Figure 6

Figure 6: Distribution of lengths of deferral among 2013 cohort who received a deferred OAS pension in 2018

Length of deferral	Percentage of seniors deferring
1 to 12 months	33.2%
13 to 24 months	27.8%
25 to 36 months	19.7%
37 to 48 months	12.1%
49 to 60 months	7.2%

Source: 10% sample of linked T1 and OAS administrative data.

Note: The 2013 cohort is the first cohort eligible for deferral. It includes only people reaching 65 years old in June to August 2013, due to data availability.

About 9% of those who deferred received the GIS in 2018. The average length of deferral was 17 months among GIS recipients.

Most seniors worked during deferral and most had high income.

About 80% worked during deferral among the first 2013 cohort of seniors deferring^{Footnote 31}. This is much higher than among OAS recipients of this cohort, among which the proportion working varied from 30% to 40%.

Text description of Figure 7

Figure 7: Proportion of the 2013 cohort employed in 2013 to 2016 (%)

Year	During deferral	Old Age Security pension recipients of this cohort
2013	85.3%	42.9%
2014	81.4%	35.6%
2015	78.4%	32.1%
2016	80.8%	27.9%

Source: 10% sample of linked T1 and OAS administrative data.

Note: The 2013 cohort is the first cohort eligible for deferral. It includes only people reaching 65 years old in June to August 2013, due to data availability.

During deferral, the average individual income of these seniors was about $100,000 from 2013 to 2016, which is more than twice as much as among OAS recipients of this cohort.

Text description of Figure 8

Figure 8: Average individual income (in 2016 dollars) of the 2013 cohort in 2013 to 2016

Year	Average total income durring deferral	Average employment income during deferral (among people working)	Average total income of Old Age Security pension recipients of this cohort
2013	102,000	87,000	44,000
2014	100,000	82,000	46,000
2015	107,000	77,000	44,000
2016	95,000	66,000	43,000

Source: 10% sample of linked T1 and OAS administrative data.

Note: The 2013 cohort is the first cohort eligible for deferral. It includes only people reaching 65 years old in June to August 2013, due to data availability.

A similar pattern is present for family income, with the average during deferral almost twice as high as among OAS pension recipients of this cohort.

Many seniors deferring would have paid the OAS recovery tax if they had received the OAS pension^{Footnote 32}.

Nearly 60% of those deferring had income over $75,000 in 2013 to 2015, so they would have paid the OAS recovery tax if they had received the OAS pension. Over 30% of those deferring had income over $120,000 in 2013 to 2015, so they would have completely repaid their OAS pension through the OAS recovery tax if they had received the OAS pension in those years.

There are seniors deferring their OAS pension in all income groups.

Even after deferral, seniors are more likely to work and to have high family income.

Among seniors who deferred their OAS pension for up to 2 years in the 2013 cohort^{Footnote 33}:

• 46% worked in 2016 (when they reached 68 years of age)
• average income was $65,000, with family income averaging $110,000 in 2016

In comparison, among all OAS recipients of the same cohort:

• 28% worked in 2016
• average income was $45,000 and average family income was $75,000 in 2016

There were people receiving a deferred OAS pension in all income groups.

Management response and action plan

Annex 1: Old Age Security program description

Annex 2: Key findings of phase 1 of the evaluation

Many factors contributed to the increase in the employment rate of seniors and near-seniors, including among OAS beneficiaries, notably growth in the service sector, technological advances and improved health levels. The increase in the GIS earnings exemption in 2008 increased employment rates among recipients of the Allowances by 1 percentage point and increased average employment income among working GIS and Allowances recipients.

The GIS top-up reached many groups of vulnerable seniors, as did other OAS benefits. For the average top-up recipient, the top-up represented 4% of OAS benefits and was equivalent to 10% of their other sources of income.

With population aging and increases in the number of OAS beneficiaries, total administrative costs of the OAS program have increased from $118 million in fiscal year 2007 to 2008 to $177 million in fiscal year 2016 to 2017. Administrative costs represented about 0.4% of program costs throughout this period.

Some of the most relevant indicators of service delivery quality are monitored closely by the department; notably, access to Service Canada agents, timeliness of benefit receipt, take‑up and payment accuracy.

However, the client satisfaction survey conducted on behalf of Service Canada was discontinued in 2010, leading to an important knowledge gap since then.

Annex 3: Evaluation questions

Evaluation questions

Do the Allowances continue to address a demonstrable need? Who are the beneficiaries of the Allowances and how has their profile changed over time?

Annex 4: Limitations and summary of studies to support phase 2 of the evaluation

Annex 5: References

ESDC (2019a), "Recipients of the Allowances Program: a Historical Perspective".

ESDC (2019b), "Who Defers the Start of their OAS pension?".

ESDC (2018a), "Evaluation of the Old Age Security Program: Phase 1", (accessed on August 5, 2019). Retrieved from https://www.canada.ca/en/employment-social development/corporate/reports/ evaluations/oas-program-phase-01.html.

ESDC (2018b), "The CPP & OAS Stats Book 2018".

ESDC (2017a), "The CPP & OAS Stats Book 2017".

ESDC (2017b), "Seniors' Labour Force Participation, Income and the GIS Top-up".

ESDC (2016a), "Document Review of Service Delivery of Old Age Security Program".

ESDC (2016b), "Participation in the Old Age Security Program – National Household Survey".

ESDC (2014), "ESDC Departmental Performance Report 2013-14".

ESDC (2013), "The CPP & OAS Stats Book 2013".

ESDC (2012), "Summative Evaluation of the Old Age Security Program", (accessed on August 5, 2019). Retrieved from http://publications.gc.ca/pub?id=9.696235&sl=1.

Gilbert, Sabrina, Zechuan B. Deng, Sebastian Yeung and Gail Fawcett (2015), "Income and Employment of Adults with Disabilities: Findings from the 2012 Canadian Survey on Disability", ESDC.

Health and Welfare Canada (1992), "Evaluation Report: Old Age Security Program", September.

House of Commons (1985), "House of Common Debates", February 4, 1985, pages 1941 to 1943.

House of Commons (1983), "Report of the Parliamentary Task Force on Pension Reform", page 180.

House of Commons (1975), "House of Common Debates", June 6, 1975, pages 6518 to 6521.

Office of the Chief Actuary (2017), "Actuarial Report (14th) on the Old Age Security Program", Office of the Superintendent of Financial Institutions Canada, (accessed on August 5, 2019). Retrieved from http://www.osfi-bsif.gc.ca/Eng/Docs/oas14.pdf.

Office of the Chief Actuary (2011), "Actuarial Report (9th) on the Old Age Security Program", Office of the Superintendent of Financial Institutions Canada, (accessed on August 5, 2019). Retrieved from http://www.osfi-bsif.gc.ca/eng/docs/oas9.pdf.

Old Age Security Policy and Legislation Division (2016), "Expert Report on the Allowances under the Old Age Security Act", Report prepared for the Social Security Tribunal hearing, ESDC, July.

Royal Commission on the Status of Women in Canada (1970), "Report of the Royal Commission on the Status of Women in Canada".

Schirle, Tammy (2008), "Why Have Labor Force Participation Rates of Older Men Increased since the Mid-1990s?", Journal of Labor Economics, vol. 26 (4), pages 549 to 594.

Service Canada (2015), "Information Sheet: Statement of Income for the GIS, the Allowance and the Allowance for the Survivor", SC ISP-3026A (2015-01-27) E.

Statistics Canada (2017), "2015 Canadian Income Survey".

Standing Senate Committee on Banking, Trade and Commerce (2006), "The Demographic Time Bomb: Mitigating the Effects of Demographic Change in Canada", Senate of Canada, June.

Tamagno, E. (2007), "Strengthening the Foundations of Canada's Pension System: a Review of the Old Age Security Program", Caledon Institute of Social Policy.