With the announcement by Federal Finance Minister James Flaherty that possible increases in CPP may be in the offing, one of the issues Canadians may have to face if the program is to remain affordable is whether the age at which Canadians can receive unreduced benefits should be increased.
This week France announced the normal retirement date would be increased from age 60-62 and a general strike is planned today in protest. The new UK coaliton government also revealed plans to raise the age at which people are eligible to draw the state pension faster than the previous government planned to do so.
The BBC news published a helpful Q&A outlining the problem, the plan and how much it will save. The article notes that it is not possible to be completely accurate but if state pension entitlement was postponed by a year for the 690,000 men and women now eligible it it would save £3.5bn a year, and another £3.5bn a year for every extra year. That saving will obviously rise as the number of pensioners taken out of the system expands with the 1960s baby boomers coming up for retirement.
If you think it can’t happen in Canada, think again. Recent CPP changes that allow workers to continue working while collecting early CPP will be phased in over a five-year period from 2012 to 2016. As Gordon Pape explains, the reduction will rise from 0.5% a month or 6% a year 0.6% a month or 7.2% a year. In addition, people who opt for early CPP but continue working will still have to pay premiums.
The feds giveth, and they can also take away. Before any further changes are made to CPP it is important to determine who the potential winners and losers are and ensure the is a reasonable consensus as to the ultimate cost/benefits of program modifications.