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ian mcgugan

One of the most intriguing facets of last week's leaders' debate was the determination with which all candidates steered clear of two issues that directly affect your personal bottom line.

Anyone listening to the debate would have no clue that ordinary folks feel at all attached to their tax-free savings accounts (TFSAs) or Old Age Security (OAS).

Perhaps Stephen Harper, Thomas Mulcair and Justin Trudeau really do find industrial policy to be more fascinating than such pocketbook issues. Or maybe they see nothing to be gained by taking on issues where public opinion already seems to be set in stone.

An online survey conducted by the Angus Reid Institute in early September found two-thirds of respondents wanted the TFSA contribution limit to be maintained at its newly expanded level of $10,000 a year – a hearty pat on the back for the Conservatives who, in April, nearly doubled the old $5,500 ceiling.

But don't interpret that as a broad endorsement of Tory policy-making. A resounding four out of five respondents in the poll were opposed to the Conservatives' decision to raise the eligibility age for OAS to 67 from the current 65.

Both policies deserve vigorous debate. So if our busy political leaders don't have time to discuss them in a public forum, let's give them a helping hand and assess these issues for ourselves.

The issue: Should Ottawa stick to its plan to boost the minimum age for collecting OAS and Guaranteed Income Supplement (GIS)?

The case for: The Conservatives announced in the 2012 federal budget that the minimum age to collect OAS and GIS will creep up from 65 to 67, with the change taking full effect in 2029. The budget document declared that the shift was "necessary to ensure that the OAS program remains on a sustainable path."

The case against: Bumping up the minimum age hits hard at lower-income Canadians, particularly those with physically demanding jobs. A 66-year-old accountant may still enjoy going into work. A 66-year-old construction worker or waitress almost certainly does not.

For those without much savings, the impact of the higher age limit is significant. Two years of maximum OAS add up to more than $13,670 in current dollars – a big loss for many individuals in lower income brackets.

Even with a lower age limit, OAS seems perfectly sustainable. Back in 2010, just before government raised the eligibility age, the federal Department of Finance asked Edward Whitehouse to assess Canada's retirement system from an international perspective. Mr. Whitehouse, who heads the pension policy analysis team at the Organization for Economic Co-operation and Development, found Canada spent considerably less of its national income on pensioners than most OECD countries.

"There is no pressing financial or fiscal need to increase pension ages in the foreseeable future," he concluded.

The issue: Should new, higher contribution limits for TFSAs be rolled back?

The case for: Most people didn't find the old, lower limits to be a hindrance. In fact, four years after the savings vehicles were introduced in 2009, fewer than four out of 10 eligible Canadians had even opened a TFSA.

Rhys Kesselman, a professor at Simon Fraser University and one of the pair of economists who first proposed the TFSA notion, calculates there was $592-billion in unused contribution room at the end of 2013. Only about one in 15 people eligible for a TFSA had actually maxed out their accounts.

Given all that, he sees no reason to expand the potential savings room. "The 2015 hike in TFSA limits will disproportionately benefit higher income and wealth groups, as well as older workers and seniors," Prof. Kesselman wrote in a report for the Broadbent Institute in June.

This isn't purely about class envy, though. The broader concern is that as more and more money flows into TFSAs, it will cost Ottawa billions in lost tax revenue. That will force the government to either cut programs or increase tax rates elsewhere.

The case against: Finn Poschmann, president of the Atlantic Provinces Economic Council, was the other half of the duo who proposed the TFSA program and he has been far more supportive of the higher contribution limits. He told the National Post the expanded savings room was "absolutely fantastic" at a time when people are living longer and thus in need of larger retirement nest eggs.

Many Canadians appear to agree. While only a minority of eligible adults have opened a TFSA, that still amounts to roughly 11 million account holders.

The real test of the expanded TFSA program may take years to unfold. The stated purpose of the program is to encourage savings, but so far there has been only a modest effect on Canada's household savings rate, which stood at a mere 4 per cent of disposable income in the second quarter.

If the TFSA program fails to spark overall savings and merely becomes a place where affluent Canadians can stash spare loonies, the calls for action will increase. But reform could take many shapes. One compromise would be to keep annual limits where they are but put a lifetime limit on contributions.

Count on this issue being a hot potato for years to come. Maybe next time, the leaders will actually discuss it.

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