This article was published in the National Post December 21st 2011. To see this story and to read related stories on the National Post website, please click here
Don’t worry, Jim Flaherty’s retirement is in good shape.
A year ago, Nicolas Sarkozy stared down France’s labour unions, who took to the streets to protest his decision to raise the retirement age to 67 from 65.
France joined Australia, Denmark, Germany, Ireland, Spain, the U.K. and the United States, in recognizing their pension systems were unsustainable without dramatic reforms.
Yet Canada has to this point been silent on the issue, in part because making changes to the Canada Pension Plan would require the approval of two-thirds of the provinces. Jim Flaherty, the Finance Minister, said this week that the CPP remains on a “sound financial footing” at its current contribution rates and there was apparently no discussion about raising the retirement age when provincial ministers met in Victoria.
However, the federal government does have sole jurisdiction over the Old Age Security and Guaranteed Income Supplement programs and Conservative sources say there is some debate about increasing the age at which people are able to access benefits from 65 to 67 in the forthcoming budget.
(OAS is available to Canadian citizens and permanent residents age 65 and older, and currently pays $533 a month. GIS is a non-taxable benefit available to low income seniors. Neither should be confused with CPP, which is a contributory earnings related pension plan paid in addition to OAS for those who have contributed.)
The Harper government has already made some moves aimed at encouraging people to work longer. In the recently passed Budget Implementation Act, the government overturned legislation that gave federally regulated employers the right to force workers into retirement because of their age.
And in 2009, the government introduced changes to CPP aimed at encouraging people to wait longer before claiming benefits (those collecting CPP at age 60 found their payment reduced by 36% from the base amount, while those who waited until age 70 saw a 42% increase on the base).
The impetus for these moves is simple demographics. Life expectancy increased by 30 years in Canada in the 20th century; those born in the 21st century will likely live to between 90 and 100. As a Mowat Centre paper by Martin Hering and Thomas Klassen concluded: “Programs that were expected to fund people for 15 years cannot adequately support people for 25 or 30 years.”
The Mowat study suggested raising CPP (and Quebec Pension Plan) eligibility gradually from 65 to 67 (and the earliest collection age from 60 to 62) – a move that it said would increase the CPP’s assets by $982-billion by 2050.
That does not seem to be on the agenda, given the complexity of getting the provinces onside. But a change to OAS appears much more likely. It would be introduced gradually, so current claimants are not affected and those currently in their mid-50s would only be required to work six months or so longer before becoming eligible.
While such a change may not bring people out on to the streets, it would still prove highly controversial. Susan Eng, VP for advocacy at seniors’ organization CARP, said her members went “ballistic” when they were polled on a similar idea. “People are worried about not being able to qualify for full benefits. If the government is going to do any of this in a budget, they will have to start convincing people, first, why it’s a good thing, and, second, that it won’t affect people already claiming benefits,” she said. “The premise has to be sold.”
Any changes to OAS or GIS would be less draconian than those suggested by reform advocates like Roger Martin of the Rotman School of Management, who has called for a target retirement age of 75, graduated according to a person’s age (0-4 year olds would retire at 75; 40 year olds at 69 and so on).
But by taking baby steps, the government would at least introduce Canadians to the idea that a retirement age of 65, first established by Otto von Bismarck in the late 19th century, is no longer sacrosanct.