age of eligibility

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The Age of Eligibility for Public Retirement Programs in the OECD

Summary

  • All industrialized countries, particularly those in the OECD and including Canada, are experiencing an aging of their populations.
  • Of the 22 high-income OECD countries apart from Canada, 18 of them (over 80 percent) (Australia, Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Korea, the Netherlands, New Zealand, Portugal, Spain, the United Kingdom, and the United States) are enacting increases in the age of eligibility for public retirement programs.
  • Thirteen countries, or almost 60 percent (Australia, Belgium, Denmark, France, Germany, Iceland, Ireland, Italy, the Netherlands, New Zealand, Spain, the United Kingdom, and the United States) are increasing their age of eligibility for public retirement programs to 67 years old or older; 2 of these (Ireland and the United Kingdom) are moving to 68 years, and Iceland is moving to 70 years.
  • Five countries are indexing their age of eligibility with life expectancy, meaning that the age of eligibility will be automatically adjusted as life expectancy changes.
  • Four countries in addition to Canada are retaining the status quo with no reforms: Luxembourg, Norway, Sweden, and Switzerland.
  • In 2015, Canada’s federal government reversed a 2012 reform that would have increased the age of eligibility for Old Age Security and the Guaranteed Income Supplement to 67 by 2029. The federal government estimates that this policy reversal will cost $10.4 billion in 2030.

Calls for More Policy Reversals

Reversing course and raising the age of eligibility for retirement benefits to 67 from 65 would be politically costly, but it makes eminent sense when one considers the aging of our population.

Reforming Old Age Security: A Good Start but Incomplete

In 2012, the federal government shocked many Canadians by announcing an important change in the cherished Old Age Security (OAS) program, one of three key income programs for seniors. The reform, which was implemented in the 2013 budget, increases the age of eligibility for OAS to 67 from 65 beginning in 2023 with full implementation achieved in 2029. While the reform is a positive first step given the aging of Canadians, more is needed.

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In 2012, the federal government implemented changes to Old Age Security (OAS), one of three key income programs for seniors. While the main reform?an increase in the age of eligibility?is a positive first step in reforming programs for seniors in the face of historic demographic change, it is only a first step.

The most prominent reform announced in the 2012 Budget concerning OAS is an increase in the age of eligibility to receive full OAS benefits. The announced changes will not affect anyone born before March 1958. Specifically, the age of eligibility will be increased to 67 years of age from its current level of 65 years of age starting in 2023, with the change fully implemented by January 2029.

It is worth noting the modest nature of the two year increase in the age of eligibility. Consider that every year that life expectancy increases, the total benefits paid under senior programs also increase but without any specific action on the part of the government. In other words, these benefit increases occur automatically as a function of increases in life expectancy. If, however, the government had indexed the age of eligibility to life expectancy in say 1966, when the CPP was introduced, the age of eligibility for OAS today would be 74 years of age.

While the federal government should be applauded for its willingness to tackle a sensitive and controversial issue, the changes made to OAS are a first step in what needs to be a much larger process.

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