Retirement age in need of rethink?

Spending for old age pension will hit $247 billion by 2060 — 5 times what it is slated to be this year, report says

OTTAWA — Record-high spending forecasts for the old age security program show a need to rethink the age of eligibility, among other measures to keep it sustainable, the opposition Tories say.

The chief actuary’s report forecasts spending to hit about $247 billion by 2060 — five times what it is slated to be this year — due to a coming wave of retirements and people living longer, meaning they draw on old age benefits longer than the program originally envisioned.

The previous Conservative government raised the age of eligibility for OAS to 67 from 65 to save on costs and prod people to work longer.

The Liberals reversed the decision in their first budget, saying the Tories had made the change without any data to support it.

The data in the report supports what the Tories tried to do — and what is being done in many other countries — for the program’s long-term financial health, said Conservative social development critic Karen Vecchio.

The chief actuary’s report estimates that returning the age of eligibility to 65 will increase spending, which the government says it knew would happen. A spokesman for Social Development Minister JeanYves Duclos said not doing so would put 100,000 seniors in poverty and cost low-income seniors about $13,000 a year in benefits.

Vecchio said the government needs to come up with a long-term plan for OAS to ensure sustainability in its funding without having to raise taxes.

Unlike the Canada Pension Plan, people don’t prepay for old age benefits, which are instead funded through annual tax revenues.

A February presentation to a group of deputy ministers said “younger generations may be required to pay higher taxes” to cover a shortfall between tax revenues and OAS spending if the retirement age remains at 65, Canadians live longer and there aren’t enough new workers to replace the ones that are going to retire.

“It’s not about raising taxes, it’s about expanding the (tax) base,” Vecchio said.

The parliamentary budget officer has said old age security is sustainable in the long-term. The actuarial report suggests as much by noting that spending as a percentage of the overall economy would rise by 2030 and fall through to 2060 as economic growth and resulting tax revenues offset rising costs.

Costs to the program are also expected to be offset by an expansion to CPP that the chief actuary estimates will mean $3 billion less in spending on the guaranteed income supplement in 2060 and reduce overall spending on OAS benefits, which are scaled back above $75,000 in annual income.

NDP pensions critic Scott Duvall said the Liberals must still do more to help Canadians retire comfortably.