The federal government is now promising to deliver seniors their emergency benefits of up to $500 by the first week of July, nearly two months after announcing the one-time payments.
But tens of thousands of seniors won’t be getting that money – for the sole reason that they opted to defer their Old Age Security pensions.
The government does not state that exclusion explicitly in its description of the emergency benefits for seniors, instead saying that anyone “eligible” for the Old Age Security pension will receive a one-time $300 payment, with those eligible for the Guaranteed Income Supplement receiving an additional $200.
Under Ottawa’s definition, those seniors who have chosen to defer their pensions, in order to receive higher payments in the future, don’t meet the eligibility requirement.
Although the government won’t release precise figures, there are a significant number of older Canadians who will be excluded from the emergency benefit that Prime Minister Justin Trudeau has said is needed because of the additional expenses resulting from the novel coronavirus and economic lockdown.
In an interview, Deb Schulte, the federal Minister of Seniors, said 4 per cent of seniors choose to defer their pensions each year.
In an e-mail, Employment and Social Development Canada said there were 410,500 new OAS pensioners in fiscal 2020; a 4-per-cent deferral rate would mean around 17,000 seniors out of a total of 427,000 delayed their pensions last year.
Over the past five years, 1.91 million Canadians began receiving the OAS. A 4-per-cent deferral rate would mean about 79,000 seniors delayed their pensions during that time, although some would have ended their deferrals and begun receiving payments.
Ms. Schulte said the exclusion of those seniors from the emergency-benefits program makes sense since they are relatively well off, while payments were intended for low- and middle-income seniors.
“We felt that this was generally the higher end that was deferring, and had the financial means to manage," she said. “They didn’t need the money, that’s why they deferred.”
However, no income test has been placed on the emergency payments, meaning that wealthy Canadians, so long as they have not deferred their pension eligibility, will receive the $300 payments. Nor are those payments taxable, meaning that low-income seniors and wealthy individuals receive the same amount.
Ms. Schulte said the government decided to make the benefit non-taxable in order to avoid complications with provincial benefits that change as taxable income increases.
The minister said she did not see a contradiction between sending emergency benefits to some wealthy seniors and asserting that seniors who have deferred their OAS pension don’t need the payment.
She added that seniors still in the work force, and who lost income, are eligible to receive the Canada Emergency Response Benefit of $2,000 a month, even if they are receiving income from workplace pension plans.
Marissa Lennox, chief policy officer for the Canadian Association for Retired Persons, disputed the idea that seniors who have chosen to defer their OAS pensions are relatively affluent, saying it is unfair to exclude them. While some of those seniors are wealthy, others are “just on the cusp,” she said.
“We’ve heard from people that are legitimately concerned about how to pay their bills, and would like to qualify for that $300. And then there are those that have earnings of $120,000 that are going to get that $300 and may not even notice.”
Peter St. Onge, senior economist with the Montreal Economic Institute, said there is a broader issue of political legitimacy with the government’s decision to exclude the cohort of seniors that have deferred pensions. The rules for retirement are crafted so that seniors will be about the same off in the long run whether they choose deferral or an immediate start to pension payments.
“It becomes a matter of trust that these programs don’t give these various options so they can rip you off along the way when you’re not looking,” he said.
Mr. St. Onge said there is a similar concern with the design of the Canada Emergency Response Benefit, which pays a flat $2,000 to recipients. However, higher-income workers who qualified for payments under the Employment Insurance system would have received more than the CERB pays. A worker with at least the maximum insurable income of $54,200 would have received $573 a week, 15 per cent higher than the CERB’s $500 payment.
He said it is understandable that the government chose a flat payment for all applicants, regardless of EI eligibility, in the early days of the economic crisis. But he said it is “disingenuous” of the government to refuse to top up payments so that higher earners are not worse off than they would have been under EI.
Mr. St. Onge said it is a problem for the government to rewrite the social contract for seniors or EI recipients, saying such arbitrary measures erode public trust. “When the government makes promises to people, we want them to believe them.”
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