Published On Mon Feb 20 2012
The proposal by the federal government to increase the age of eligibility for Old Age Security from age 65 fails to address the problem facing Canadians.
The trouble is not that increases in expenditures for OAS are unsustainable as the baby boomers begin to reach retirement age. Rather it is that Canadians are starting their working lives later than ever, living longer than ever and wish to retire — with lots of money — while in their late 50s or early 60s.
Making clear that this is the predicament shifts the debate from the OAS to the Canada Pension Plan. After all, it is the CPP that provides workers with a significant amount of retirement income.
Making sure that Canadian workers can retire in comfort is possible in only two ways: Require workers to contribute more of their employment income to pension plans, or require workers to stay employed longer. Neither will be popular, but there is no magic bullet.
However, increasing the age of eligibility for OAS from the current 65 will not accomplish either. Workers do not contribute to the OAS, and it is paid to all, not only workers. So increasing its age of eligibility will not increase the retirement security of older Canadians, but rather make it more precarious.