Thursday, January 26, 2012

67

Harper is talking pension reform in Davos and one big change could be coming:
In the wake of Harper's speech, it now appears that the Conservative government could be poised to gradually change the Old Age Security system so that the age of eligibility is raised to 67 from 65.
More from Canadian Press:
On pensions, the government will move to ensure that demands on the Old Age Security benefit don't bankrupt the system.

"Our demographics also constitute a threat to the social programs and services that Canadians cherish," he said. The Canada Pension Plan "does not need to be changed" because it is fully funded, but officials point to an OAS bill that will soar as the population ages.

Current recipients of CPP and OAS won't be affected by the changes, Harper added.

OAS is a cornerstone of the retirement security system and, together with the Guaranteed Income Supplement, has been the main reason poverty among seniors in Canada is so low.

But since the population is aging and the number of taxpayers is dwindling, the program is seen as unsustainable in its current form.

Officials noted that the cost of OAS is pegged to rise to $108 billion a year in 2030 from $36 billion in 2010. That's because the number of Canadians over 65 will rise to 9.3 million in 2030 from 4.7 million in 2010.

The government has been contemplating changes to the retirement security system for years. One option could be to raise the age at which people can claim benefits.
There's been no ground laid, politically, for such a change to the pension system. So they're going to have a hard sell on it if this is indeed the plan. The Conservative priorities will once again come under serious scrutiny. These are core government services being eyed for dialing back.

And given that we have done so well during the financial crisis, weathered the storm and are relatively strong on the international financial scene, as we are constantly told by this government, it would be surprising to learn that we apparently have to take similar measures to an Italy - who are on a financial precipice - and who grappled with raising their pension age eligibility to 67 in the last few months. Granted, the Harper proposal would be to raise OAS age eligibility, not CPP, so there is a big difference. But given the tenuous savings situations for many Canadians these days, this change, if it were to be brought forth in the budget, would be significant.

Maybe Canadians will now start to wake up to the choices this government is making, a possible upside to this news.

Update (6:00 p.m.): Harper's words in Davos are vague. But they are being interpreted as having implications for OAS:
Our demographics also constitute a threat to the social programs and services that Canadians cherish.

For this reason, we will be taking measures in the coming months.

Not just to return to a balanced budget in the medium term, but also to ensure the sustainability of our social programs and fiscal position over the next generation.

We have already taken steps to limit the growth of our health care spending over that period.

We must do the same for our retirement income system.

Fortunately, the centrepiece of that system, the Canada Pension Plan, is fully funded, actuarially sound and does not need to be changed.

For those elements of the system that are not funded, we will make the changes necessary to ensure sustainability for the next generation while not affecting current recipients.