Rethinking the First Pillar of Canada’s Retirement Income System

From: Tammy Schirle 

To: Old Age Security watchers 

Date: October 23, 2026

Re: Rethinking the First Pillar of Canada's Retirement Income System

For several decades, Canadians have failed to advance discussions on how to improve the Old Age Security Act, which defines policy for monthly pensions (Old Age Security) and supplements (including the Guaranteed Income Supplement) for older Canadians. It  represents the first pillar of our retirement system, and one of Ottawa’s largest spending items; $88 billion this year. Why are we failing to make meaningful progress? Is there a better way to approach this conversation?

We can start by acknowledging there are really two distinct objectives Canadians hope to achieve with OAS Act. First, they want to recognize the past and current contributions of seniors to society. Second, Canadians want to alleviate poverty among seniors and ensure they are able to achieve a reasonable standard of living. With two distinct policy objectives in hand, it is often considered wise to have two distinct policy instruments to work with. Our first pillar, however, is really designed to function as one large program, with several interdependent components.

Some background is useful. Canada introduced our first Old Age Pension in 1927. As a means-tested benefit available to individuals age 70 or older, with much shorter lifespans in those years, only a few were eligible. The benefits were also quite modest, up to $240 annually (or $4,481 in today’s dollars). In 1952, Canada introduced Old Age Security (OAS), and since 1967 is has extended the near-universal OAS and the income-tested Guaranteed Income Supplement (GIS) to people age 65 or older. In 1975, the program expanded further, creating an allowance for some married people age 60-64 (with the older spouse 65 and older) and again in 1985 to widows and widowers age 60-64. Over time benefit generosity also increased. By the summer of 2026, an unmarried 65-year-old could expect to receive up to $22,508 in OAS and GIS benefits. 

This expansion of benefit eligibility and generosity has driven remarkable reductions in senior poverty rates (which I discuss here). At only 5.5 percent (in 2023, based on our official poverty measure), this is clearly a Canadian success story. Our senior poverty rates are very low, by historical and international standards.

But it is costly. In 2026, we are spending roughly $88.8 billion on the OAS suite of programs. We also spend several billion dollars on various tax expenditures with similar goals: $5.6 billion on the age credit, $1.4 billion on the pension income credit, and another $2.1 billion on pension income splitting. I have the impression that most Canadians want our low-senior-poverty success story to continue, but as younger people find today's labour and housing markets incredibly challenging, we'd also like to make sure we are using our available tax dollars effectively.

To think about what we might do differently, we should review what we do. On the surface, OAS and GIS seem simple – we offer a lump sum benefit to most people age 65 and over, and add in a supplement to support those who are low income. But how much do people actually get? It gets complicated fairly quickly, with eligibility depending on marital status, age, individual and family incomes, the sources of income, the length of time one has lived in Canada, and more. For the purpose of illustrating some basic features affecting most older Canadians, I'm going to focus on an example of a 65-year-old unmarried individual.