This article was published by The Canadian Press as well as major papers across the Country on March 29th 2012. To see this article and other related articles, please click here
OTTAWA – Anyone younger than age 54 will have some redrafting to do when it comes to retirement planning.
The federal government has raised the eligible age for old age security to 67, postponing existing benefits for two years.
The widely expected change to OAS will have a trickle-down effect on people’s financial plans. It will affect the guaranteed income supplement, veterans’ benefits, aboriginal benefits, survivors’ allowances and especially the way many companies have set up their employees’ pension plans.
But the changes won’t kick in right away.
Ottawa will start making the adjustments in 2023, and phase them in gradually over six years.
That means anyone over 54 won’t be affected. People in their early 50s will see moderate changes. And people under 50 will feel the full force of the new policy.
The government is also allowing some flexibility in the new retirement system, by allowing workers to voluntarily defer their government benefits for up to five years and collect higher amounts when they actually retire. This change comes into effect next year.
Someone who does not want to retire at 67 can keep working for a few extra years and eventually collect a slightly bigger old age security benefit — imitating the way the Canada Pension Plan already functions.
The new policy comes with a commitment to compensate provincial governments for any extra costs that may arise. But it does not contain any specific provisions to deal with low-income seniors who will see two years’ of benefits disappear.
“As many have said before, these changes will have significant impact on low- and modest-income individuals,” said Tyler Meredith, research director at the Institute for Research in Public Policy.
Since lower-income Canadians have significantly shorter life spans than higher-income Canadians, they carry disproportionately more of the loss in benefits, Meredith said.
About 98 per cent of Canadian retirees receive OAS, and a third of those also receive the income supplement. The benefit system has been the key reason why poverty among seniors has diminished markedly over the last three decades.
By delaying the changes a decade, the government is provoking inter-generational conflict, pitting the young against the older generation, said seniors’ advocate Susan Eng of CARP.
“They’re saying ‘let’s do it for the children.’ But it’s the children who get hurt,” Eng said in an interview.
The Conservatives stormed ahead with the changes without listening to the many policy options that could have saved the government money without exacerbating poverty or forcing the young to shoulder the burden, she said.
The only bright side, she added, is that the government has given opponents 11 years to try to change Ottawa’s direction.