OAS rollback a throwback
Although the Liberals have stayed mum on most of their budget plans, Prime Minister Justin Trudeau has confirmed one detail: the eligibility for Old Age Security is being rolled back to age 65, effectively banging the dents out of the retirement plans affected by the Harper government’s 2012 decision to slowly increase OAS eligibility to age 67.
“Next week’s budget will confirm that we are keeping the old retirement age at 65,” Trudeau said in an interview with Bloomberg TV in New York Thursday. “How we care for the most vulnerable in our society is very important.”
Trudeau’s decision is a move against the trend in advanced nations to raise the retirement age to 67 — or even older — as life expectancy increases and more seniors stay on the job. Stephen Harper’s plan, which was announced as part of the 2012 budget and had a phase- in period that would only affect Canadians born after 1958, had not yet affected any retirees.
Harper’s move to 67 was intended to conserve revenues. It was consistent with the idea that it is healthy — for people and the economy — to stay in the workforce longer.
Limiting subsidies for l eaving the l abour f orce would “encourage older people to stay in work longer, boosting GDP and taxes,” noted The Economist in a Dec. 5, 2015 editorial.
While the move back to eligibility at age 65 was welcomed by advocates for the poor and the elderly, it does make Canada the odd one out when it comes to global state pensions. The U. K. is changing the qualification age for the British State Pension beginning in 2018.
Ireland is also boosting its retirement age to 68 as of 2028. The U. S. will move the age for Social Security eligibility to 67 by 2027. Age 67 is also the new benchmark for retirement in the Netherlands, Denmark, Belgium, France, Germany and Spain. Australia is lifting its state pension age from 65 today to 67 by 2023.
But Canada’s social policy advocates support the reset to 65. Wanda Morris, vicepresident for advocacy and chief operating officer of the Canadian Association of Retired Persons in Toronto, explained that the problem of senior poverty was exacerbated by the Harper move to set OAS eligibility at 65.
It was a phase- in and, in fact, no one was ever hurt by it, given that it would affect only people now in their mid-50s or younger. But that is not where the problem ends, she said.
“Old Age Security has become i ncreasingly i mportant as defined- benefit pension plans become less common,” Morris said. The Canada Pension Plan is designed to replace only about a quarter of individual earnings, she noted. OAS benefits then function as a top- up of other income, up to the point at which the OAS clawback starts, about $73,682.
“So, for us and for them, the move of OAS eligibility back to 65 is good news.”
David Macdonald, senior economist for the Canadian Centre for Policy Alternatives in Ottawa, agrees, pointing out that the main beneficiaries of the change are lowincome seniors.
“The people who are helped most by this reset to age 65 are lower- income single women because they are the ones most likely to live in poverty in old age,” he said. “About a third of single women over 65 live in poverty, which means that after taxes and transfers, they have less than $21,747 to spend in 2016.”