Raising The Retirement Age Is The Wrong Way To Deal With The Retirement Crisis

Raising the age of eligibility for Old Age Security/Guaranteed Income Supplement (OAS/GIS) benefits is the worst possible way to deal with the retirement income security crisis facing Canadians.

Experts such as former Assistant Chief Statistician Michael Wolfson project that one half of all middle income baby boomers face a severe cut to their living standards in old age. This is due to falling employer pension coverage (down to 25% in the private sector), rising household debt combined with low savings, and the big hit to “fend for yourself” RRSPs which comes from high fees and low investment returns.

The right way to deal with this looming crisis is to expand the Canada Pension Plan now to raise incomes for seniors in the future.

The wrong way is to raise the retirement age for OAS/GIS.

Raising the retirement age will cut a basic building block of retirement security, the OAS pension of $540.12 per month which now goes out to 4.9 million Canadians aged over 65. Almost all citizens qualify.

Receiving OAS also makes seniors eligible for the GIS top up, which provides one in three seniors with a supplement which ensures they have a minimally adequate income in old age.

Raising the retirement age from age 65 to age 67 or higher would impact all future seniors, but would especially impact those who would qualify for the GIS supplement. Many older workers, especially the single near elderly, already face very high rates of poverty.

It is often argued that we have to raise the retirement age because Canadians are living longer. But raising the retirement age by 2 years will especially impact low income older workers. People in the bottom 20% of the workforce pass away 5.6 years earlier than those in the top 20%. Half of all low income men will collect an OAS/GIS cheque for only 10 years.

Raising the retirement age would also have a negative impact on those persons age 65 who are in poor health, and cannot continue to work.

What about cost? The latest actuarial report on the OAS/GIS projects that the number of recipients will increase from 4.9 million today to 9.3 million in 2030.

But the increase in total costs that is projected is much more modest, from 2.4% of GDP to a peak of 3.2% in 2030. That is because our economy will continue to grow.

Well under 1% of GDP is a small price to pay to maintain a basic retirement income for all Canadians, and especially the one in three seniors who have low incomes.

7 comments

  1. You make cogent arguments. However, if as you say that the problem with raising the age of retirement is its disproportionate effect on poorer seniors, then this can be mitigated through countermeasures. That leaves tightening the regime for the non-poor as a legitimate point of discussion.

  2. Interesting. So, GIS is far more means tested than OAS. I wonder if OAS should be more means tested to be more efficient or not.

  3. There is an additional dimension to all this. I’m not here to argue with anything that Mr. Jackson says, in fact I completely agree with it. On the other hand there are people who want to continue working past “normal” retirement age, and are fit to do so both physically and mentally. In the case of these people, we have to teach employers to stop the “ageism” that is going on in hiring practices. Younger people my complain, entirely justifiably, that this means fewer opportunities for them and I am fully aware of how difficult things are for them. None of this is their fault and the financial “crash” which started in the U.S. in 2008 is not the only reason for the current mess in Canada. It is also being aggravated by immigration policies that take no account of the massive over-supply of people versus job openings, such that somewhere between 70 and 5,000 people apply for every job opening posted publicly. We might see some improvements in this when government and everybody else wakes up to the obvious fact that we have work hard on making the economy perform to the point where it actually creates enough jobs for everybody who wants to work – which is obviously important for generating adequate revenues for pension funds so that people who want to retire (or need to because of ill-health) are not compromised. A newspaper article two days ago, “Unemployed outnumber jobs more than 3 to 1, says StatsCan” actually vastly under-states the numbers of jobs needed to employ properly everybody who wants to work, partly because it contemplates only the so-called “official” unemployed who in fact represent a relatively small part of the overall problem.

  4. With regared to the “ageism” issue in corporate hiring practices, referred to in my previous posting, the problem is actually far worse than what I suggested. The problem actually affects people aged anywhere from about 40 upwards, depending on what you’ve seen in print or heard or what line of work you are in. It can result in people being forced to “retire” long before “normal” retirement age, entirely because of ill-informed prejudices in the workplace. Such people are also effectively stopped from contributing to any retirement pension fund or the tax base – never mind anything else – which again serves to compromise the situations of those who want to retire, or have to because of ill-health.

  5. The right thing to do would have been means testing. Why give the wealthy CPP when they don’t need it? Meanwhile those who really NEED help in their old age have to wait two more years to get it. Most 66 year olds are not able to work at physically demanding jobs. Yesterday they were rightly considered retireable, today they are supposed to be able to work. This is arbitrary and just plain sick, what Harper has done here.

    I hope the NDP has the sense to promise to bring the retirement age back to 65 by taxing the rich and corporations appropriately. They would win for sure.

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