OAS change would hit seniors hard

Retirement Road Sign

This article was originally published in the Lethbridge Herald on January 14th 2012.  To view the original article as well as related articles on the Lethbridge Herald website, please click here.

Raising eligibility age wouldn’t come without a fight
The “Golden Years” could be delayed for many Canadians if the federal government does indeed raise the age for Old Age Security eligibility, as some are speculating.

But while such a change might seem to make sense from a federal bean-counter’s point of view, it would represent a major change in the rules of the game that would have a severe impact on a large number of Canadian baby boomers who are closing in on that magic retirement age. Pushing back the age at which seniors can start collecting OAS benefits by two years would likely mean many Canadians who would otherwise retire at 65 would have to keep working an extra two years. Or it would mean they would have to struggle through two years on an extremely limited income.

It’s easy to see why the federal government might consider raising the OAS eligibility age. The costs of the OAS program are poised to grow dramatically in the coming years as the baby boomers enter their senior years. A story in the Dec. 21 Globe and Mail indicated that OAS costs are projected to climb from $36.5 billion in 2010 to $48 billion in 2015, an increase of 32 per cent. Those costs are expected to soar to $108 billion by 2030 as the number of Canadians receiving OAS doubles.

When the OAS was introduced in 1952, the life expectancy for male Canadians was about 66 years and for females, about 71 years. Today, it’s 78.5 for men and 83.1 for women. According to a January 2010 report by Statistics Canada, average life expectancy in Canada is projected to climb to 81.9 for males and 86.0 for females by 2031.

Consequently, the OAS system has been stretched thin by the combination of having to pay Canadian seniors for a longer period of time and the increasing number of Canadians receiving OAS payments. And it’s only going to get worse.

But the federal government will have a fight on its hands if it does make a move to raise the OAS eligibility age from 65 to 67. When the French government voted to implement pension reforms that raised the official retirement age from 60 to 62, it sparked a wave of strikes and protests in that country.

The Globe and Mail story quoted Susan Eng, vice-president of the Canadian Association of Retired Persons, as saying such an attempt would be “political suicide.”

She’s probably right. Canadians who are closing in on age 65 with their eyes on a well-earned retirement are not going to be pleased if suddenly they’re going to have to delay those plans by two years. For those who are unwilling or unable to tack another two years onto their working lives, it could mean financial hardship. Canadians who have watched others start collecting OAS at age 65 are obviously going to resent it if they are told they must wait until they turn 67 to enjoy the same benefit.

It’s understandable why the federal government would consider such a change. Other countries are facing a similar reality of unsustainable pension systems. But the Conservatives will have a battle on their hands if they attempt to change the OAS eligibility age. Canadian seniors won’t take such an affront quietly.

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