The pogey probem

Let’s talk wrinklies.

There are 8.4 million people in Canada who are now 65 or older. That’s 20% of the population.

Of those, 7.5 million old snorts are collecting OAS monthly payments. That includes just over a hundred thousand left Canada for good, but still get their cheques. (If you live here for at least 20 years after turning 18 you receive some old age pogey for life, regardless of location.)

By the way, OAS pays $762 a month until age 75, when it bumps up to $838. So, about $9,500 a year on average. That’s enough to gas up your Silverado once a week for a year.

Of course, there’s a clawback of benefits for people deemed not to need the money. The reduction happens at an income of just over $93,000 and all the money disappears by an income of $152,000. Retired couples making up to $185,000 can still pocket decent sums each month.

To put that in context, the average income of a 65+ Canadian these days is $46,100. The average household pre-tax income of senior couples is 74,200. So, yeah, the vast bulk of wrinklies get the whole banana. And it underscores just hos bad we are, as a nation, at looking after ourselves.

Final point: OAS is not like the CPP, which is funded by employers and workers through direct contributions, with the pot managed by investment professionals and benefits based on years worked and money earned. OAS is welfare, pure and simple. It’s also utterly ageist. You get it for being old, and you contribute nothing specifically towards funding it.

No wonder some people are riled up. Others are worried. The OAS plan is completely unsustainable, experts keep telling us.

Darren is concerned.

“I read recently that the government may look at the large Old Age Security payments they need to make and a place where they could save some expenditures,” he writes me.

“Would appreciate your thoughts on what the feds may decide to do whether it’s reducing the payment amounts, or increasing the age of qualification, or some other options? I am 64 and looking at how much I should be able to count on (and when) when I start OAS.”

The raw fact is that OAS is costing the country $80 billion this year and that will rise to $108 billion within just five years. This is the largest single expenditure of the federal government, dwarfing all else. Like interest payments on the debt, it is a spiralling, relentless, voracious beast whish has started to crowd out spending on families, health care, defence and other line items.

Meanwhile, as you know, we are not bringing in enough taxes to cover spending. The shortfall this year will be about $55 billion – money we must borrow with bonds – added to the pile of existing debt, now $1.51 trillion (costing %54 billion a year in interest).

So, in five years when OAS soaks up an extra $28 billion annually, and the debt interest payments are even higher, the deficit will increase and the pressure will be on Ottawa to slash spending elsewhere (like on healthcare transfers to provinces) or goose taxation. Meanwhile you can count on higher interest rates as the fiscal picture dims and investors demand a risk premium for holding maple debt.

Is banker Carney going let that happen?

Nope. Not a chance.

Demographics is not on his side, however. Just a decade ago 5.8 million people got the old age pogey. Now it’s 7.4 million. In five years it will be 9 million Boomers with their hands out. By the way at that time – by 2030 – the first members of GenX start collecting OAS. There are eight million people in that cohort, or about 19% of the entire population – which means this OAS debacle will continue into the future with the rapacious velocity of the present.

What can we do? What will the feds do?

Any changes will be brutal, of course. The political backlash will hurt those with the stones to act in a responsible and forward-looking fashion. And there is the valid argument that the country is better off sinking into unrepayable debt to support needy seniors than letting them become an equal burden on social services as truly poor folk.

But still, change will happen. It has to, or future generations will be paying far more of their incomes and receiving considerably less – since we have already pushed more than a trillion dollars onto their shoulders. Within a few years that will be two trillion, rivalling the size of the entire economy. Yeah. Unsustainable. Not the stuff a guy who ran two central banks can live with as his fiscal legacy.

So, next?

Cutting off those living outside Canada will save peanuts.

That leaves us with (a) reducing monthly payments, instead of increasing them annually; (b) lowering the clawback level and basing it on household (not individual) income; (c) raising the age you qualify for OAS to 67 or maybe 70; or (d) tossing out OAS and replacing it with a new structure that would end universal monthly payments and focus on more government support for later stages of life when care and medical expenses swell.

What solution do you support?

Don’t say ‘none’. Just ask that our leaders be honest. This once.

Oh, and save more for your old age. Lots more.

About the picture: “This is Bella, our JRT, with my sock again!” write Sandra and Wayne. “She gets very excited on laundry day.  Can’t wait for the first opportunity to nab my socks out of the basket.  Love your blog.”

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Source: https://www.greaterfool.ca/2026/10/15/the-pogey-probem/