Question

1. The Public Pension System (20%):

• How are Old Age Security and Guaranteed Income Supplement benefits determined and how are they financed?
• Are OAS & GIS subject to income tax? How do other sources of income effect OAS & GIS? Are there any exceptions/exemptions?
• According to the 2019 federal budget report, what proportion of all federal expenses constitute elderly benefits expenses?
• According to the Chief Actuary report, how are elderly transfer expenses projected to increase with population aging in the future?

• How are Canada Pension Plan benefits determined and how are they financed? How does Canada’s financing scheme compare to a strict Pay-As-You-Go scheme?
• What are the components of the CPP benefit formula and what does benefit formula do? Which components of the formula are subject to reform?

• How does OAS & GIS influence measures of elderly absolute & relative poverty (what are the implications of price- vs. wage-indexation)?
• From public pension benefits alone, in Canada what are the hypothetical gross replacement rates for someone with career average earnings equivalent to 25%, 100%, and 175% of the average industrial wage? How much does OAS & GIS alone replace for those with average career earnings amounting to 25% of the average industrial wage? Approximately at which level of average career earnings as a percentage of the average industrial wage do gross replacement rates fall below 60%? Make a line plot with average career earnings relative to the YMPE on the x-axis and the gross replacement rate on the y-axis; plot a separate series for replacement from OAS & GIS, CPP, and total public pension benefits. What does this imply about the functioning of Canada’s public pension system, and which subset of Canadians need to be wary of this?

Answer 1

1. Old Age Security and Guaranteed Income Supplement benefits determined and how are they financed:

Generally, elder care is expensive and lots of planning is needed to avoid unnecessary tax burden.  The Old age security programme is one of the main programmes f Canada's retirement income system. It is provided to elders that supplements other earnings with a modest level of pension. These include benefits like OAS pension, the guaranteed income supplement (GIS) and the allowance. The Canadian government finances the OAS programme from its general tax revenues. The OAS pension is based on the income of the people neither the employment history of the people. OAS is taxable and is adjusted quarterly to keep up with the inflation. OAS payments are monthly based. Canadian seniors who are at age 65 can available the benefits of OAS. Alongside the seniors have lived in Canada for at least 10 years. The benefit amount of the pension is determined by the number of years they have lived in Canada. If the seniors have been in Canada for at least 40 years, they can avail full old age security pension. The Guaranteed Pension Supplement (GI) is a programme where the residents of Canada receive either basic, full or even partial old age security pension. People with little or no income is qualified for this benefit. Seniors has to reapply every year. The amount of payment is determined by the income of the individual and the martial sttatus.