universal pensions in Canada

From 1927, Canada had a system of means-tested pensions in effect for British subjects 70 and older who met residence requirements. Not until 1952 was this superseded by a universal pension. Beginning in 1965 the age of eligibility for a universal pension was gradually lowered, reaching 65 years in 1970.

Surprisingly (to me) only a minority of voters initially supported elimination of means-tests. As can be seen in the table below, as late as November 1946 only about a third of the public favoured universal pensions, when fewer than half of all Canadians 70 years of age and older were receiving an old age pension. Public opinion changed when Members of Parliament (MPs), a majority of whom wanted to eliminate means tests, began to draft legislation known as the Old Age Security Act. Canada’s move to universal pensions, in short, appears to have been a top-down rather than a bottom-up process.

[A] majority of the public was seen to support universal pensions in the autumn of 1950, following the Report of the Joint Committee [of the Senate and the House of Commons] on Old Age Security, but overwhelming public support was not forthcoming until after the Old Age Security bill had been introduced into Parliament on 25 October 1951. …

[I]t should be noted that old age security benefits are not really universally available at a uniform amount. Given that payments made to pensioners are taxable income, a modest portion is recovered by the federal treasury through income taxes. A 1984 National Council of Welfare report on pensions has estimated that only about 6% of the old age security program’s costs are recovered in this way, since many elderly persons have limited incomes and pay little or no income tax.

Source: Canadian Institute of Public Opinion.

June Dewetering, “The Old Age Security Fund“, Parliamentary Research Branch, MR-58E, 14 March 1990.

Means-tests were re-introduced in 1989 by the Progressive Conservative government of Brian Mulroney. The move to end universal pensions was ‘top-down’ – lead by politicians in Ottawa – just as the move to introduce them had been.

The Mulroney Conservative government came to power in the mid 1980s espousing neo-conservatism (or neo-liberalism) in the same ‘wave’ which elected Thatcher in the UK and Reagan in the U.S. Regarding social programs, the message was that spending had to be restrained, and “benefits targeted to those in need”. ….

The universality of the Old Age Security ended in 1989, with that year’s federal budget ‘clawback’. The budget declared that seniors had to repay 15¢ of their pension for every dollar of net income earned over a certain threshold. The threshold was $53,215. ….

But the threshold level where the clawback kicked in was only partially indexed against inflation – indexing continued only at inflation rates above 3% …. This meant that over time, the threshold level declined in real terms. ….

The Tories’ (partially indexed) clawback ended the universality of the OAS because it was now allocated on the basis of income. Their strategy for selling it to the public was to emphasize that it only affected the wealthiest 4.3% of the seniors’ population: why should they get a government benefit? But because of the partial de-indexing, a growing number of seniors could expect to be affected (depending on the inflation rate). Thus, the clawback was another example of the ‘politics by stealth’ strategy, coupled with seductive rhetoric about the reasonableness of ‘targeting’ programs.

National Union of Public and General Employees, “A Brief History of Pensions in Canada“, Pensions Backgrounder #2 (March 2007), pp. 7-8.

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