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BC Federation of Retired Union

From The Advocate, March 2012

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Are our public pensions truly unsustainable?

“We're going from 2.4 to 3.1%. Italy has that for breakfast”
Kevin Milligan of UBC


Published March, 2012 - Stephen Harper argues that Old Age Security will become unsustainable as more baby boomers retire.

There is no doubt the cost will go up. Actuaries say the cost of OAS and GIS will increase from 2.41 percent of GDP to 3.14 percent by 2031 – an increase of about $12 billion.

On the other hand, a recent OECD study found that Canada has a “more favourable demographic outlook than many European countries.” The analysis finds Canada does not face major challenges of financial sustainability with its public pensions.

By way of comparison, Italy spends about 14 percent of GDP on public pensions.

“We’re going from 2.4 to 3.1 per cent. Italy has that for breakfast,” says Kevin Milligan, associate professor of economics at UBC.

The projections that are suddenly causing Harper such concern are no surprise. They have been well-known and analyzed for many years.

“I’m mystified. Why talk about it now?” says Malcolm Hamilton, an actuary at Mercer Consulting. “I’m looking at numbers and projections that I’ve been looking at for over a quarter of a century — without anyone in government saying there was an unmanageable problem.”

“It’s always been known that costs would escalate. Canadians have been led to believe this would be taken care of. Governments would absorb the costs or find economies elsewhere. They should have said something earlier if they had concerns.

“You can’t let people cruise up to retirement age without getting benefits they counted upon. It’s a little late to decide the system is unsustainable,” says Hamilton.


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