The latest actuarial projections of the financial status of the Old Age Security program spell out the impact of demographic changes that will have a major impact on the ratio of workers to retirees.

The projections are detailed in the seventh Actuarial Report on the Old Age Security Program, which was tabled in Parliament on May 30.

Based on information from Dec. 31, 2003, the report projects that the ratio of the number of people aged 20 to 64 to those aged 65 and over is expected to fall from about 4.8 in 2004 to 2.2 in 2075.

The number of beneficiaries for the basic pension is expected to more than double over the next 26 years, growing from 4.1 million in 2004 to 8.9 million by 2030.

Also, the number of Guaranteed Income Supplement and Allowance beneficiaries is expected to increase by 59% over the next 26 years, growing from 1.6 million in 2004 to 2.5 million by 2030.

“The percentage increase is less than for the basic pension due to the expected decline in recipient rates for these benefits over the same period,” the report notes.

Total annual expenditures are expected to increase by 31% over the next six years, from $28 billion in 2004 to $37 billion in 2010 and to $110 billion by 2030. As a result, the ratio of expenditures to GDP is expected to increase from its 2004 level of 2.3% to 2.4% in 2010 because the increasing flow of new beneficiaries is only partially offset by the effect of the indexation formula.

“Maximum benefits are indexed to the rate of inflation, which is assumed to be lower than the rate of growth in both the GDP and the income of new retirees, which reduces the amount of income tested benefits payable,” the report explains.

The ratio of expenditures to gross domestic product increases from 2.4% in 2010 to a high of 3.2% in 2030, driven largely by the retirement of the baby boom generation, it predicts. Although, “Over the longer term, the effect of price-indexation of benefits predominates and results in the reduction of the ratio of expenditures to gross domestic product to 2.0% by the end of the projection period in 2075, or about 11% lower than its current level.”