Abstract
An aging population will raise the cost of Canada's Old Age Security/Guaranteed Income Supplement (OAS/GIS) programs. If the benefit levels under OAS and GIS were increased in line with wages to maintain their antipoverty effectiveness, the program cost would double by 2030 as a percentage of the gross domestic product. With this scenario as a base, we employ a life-cycle model to explore the effect of program design changes on the cost of benefits, taking into account the interaction between OAS/GIS benefits and private retirement saving. One finding is that, despite savings responses, raising—not lowering—the 50 percent benefit-reduction rate under the GIS would reduce program costs.
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