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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.
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The Reality of Retirement Income in Canada

Building on the three pillars of Canada?s pension system, the current retirement income system serves the vast majority of Canadians very well. The problem of poverty among the elderly, which drove many of the reforms in the 1970s and 1980s, has largely been eliminated.

The 2008 financial crisis reminded Canadians about the uncertainty of asset values in homes and financial markets, and the vulnerability of pension benefits to insolvency, provoking angst about the adequacy of Canada?s retirement income system. Some provinces now want to undertake an expansion of the Canada Pension Plan (CPP) out of concerns that the pension system will not adequately meet the future needs of the middle class. In fact, the Ontario government has pledged to create its own provincial public pension plan, given a lack of federal and provincial consensus on expanding the CPP.

However, there is no crisis for the current generation of retirees. Building on the three pillars of Canada?s pension system, the current retirement income system serves the vast majority of Canadians very well. The problem of poverty among the elderly, which drove many of the reforms in the 1970s and 1980s, has largely been eliminated. Seniors are living longer, healthier, wealthier, and more productive lives. This is one of our society?s great achievements in recent decades.

The improved outcomes for older Canadians resulted from far more than government policymaking. Canadians, as individuals, have shown good judgement in managing their retirement, drawing on resources both inside and outside the formal pension system. They are saving much more than is commonly assumed; they are investing more in RRSPs than any other form of pension assets; they are rapidly accumulating assets outside of the formal pension system; and they are radically changing their labour force behaviour as they approach retirement. The available evidence suggests that they will be knowledgeable partners, not passive victims, in managing their retirement security in the future.

The problems forecast by critics of the current pension system are long-term projections based on shaky foundations. Rather than expanding the Canada Pension Plan as Ontario and other provincial governments propose, governments would better serve Canadians by addressing gaps in the current system of pension support, such as the growing fiscal burden of funding social security and public sector pension plans, and the pockets of poverty among single elderly individuals who never worked.

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