When the First World War broke out in August 1914, the leader of the federal opposition in Parliament, Wilfrid Laurier, immediately pledged his co-operation and assistance to Prime Minister Robert Borden's government. This parliamentary unity allowed the government to assume an unprecedented level of control over the country's economy in order to supply the war effort.
By 1917, however, the issue of conscription divided Parliament and led to the creation of a Unionist government made up of both Conservatives and some Liberals under the leadership of Robert Borden. Such division affected the population more generally, as the social dislocations caused by the Great War fuelled public calls for large-scale social reforms across the country. The federal government carried into effect a number of reforms that further strengthened its power in many different areas, including pensions for war veterans and their families. Provincially, this period also saw the introduction of mothers' allowances, beginning in Manitoba in 1919, and workers' compensation, first initiated in Ontario in 1914.
As the federal government assumed more and more control over the economy during the war, a national Income Tax and a Business Profits Tax were introduced, increasing the government's financial capacities. These taxes were at first meant to be only temporary measures, but the continuation of the Income Tax after the end of the war in 1918 provided the federal government with much of the funding required to implement the Old Age Pension program in 1927.
The issue of a national pension program for seniors gained prominence after the war, as social advocates and reform-minded politicians argued that the federal government should use its new power and financial capacities to extend the pension provisions offered to war veterans. In 1921, a minority government was elected federally for the first time in Canadian history, making it impossible to pass any controversial legislation. The 1925 election saw similar results, and Prime Minister William Lyon Mackenzie King sought the support of the Progressive party and the only two elected Labour Members of Parliament.
Labour Members James S. Woodsworth and Abraham A. Heaps, in co-operation with Progressive leader Robert Forke, presented Mackenzie King with a number of policy initiatives they considered essential, one of which was an old age pension program. The Prime Minister agreed to pursue the reforms in return for the support of the two parties, thus ensuring his government would not fall.
Before Mackenzie King was able to act on the issue of old age pensions, however, he chose to resign when the Governor General, Lord Byng, refused his request for an election as his government faced a vote of non-confidence. The Conservative leader, Arthur Meighen, was called on by Lord Byng to form a government but was unable to do so successfully and the "King-Byng affair", as the incident came to be known, ended in 1926 with the election of a majority Liberal government under Mackenzie King. Only upon obtaining a majority was Mackenzie King able to undertake any large-scale reforms. Accordingly, the Old Age Pensions Act came into effect in 1927.