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Thursday, February 2, 2012

What's all the fuss about Old Age Security?

Like most people I see a day when retirement will be upon me. So while I am doing my best to build a nest egg for those years I also realize that I will be counting on the government for some of my retirement income.

This means that anytime our federal government discusses changes that may effect the retired segment of our population I listen up. Naturally when I recently heard Prime Minister Harper speak on the need for raising the age of eligibility for Old Age Security (OAS) to 67  from it's current 65 my ears perked up and I immediately assumed the worse. However like so much of what the mainstream media serves to us there is far more to it than meets the eye.

First off, there has been NO talk about raising the age of eligibility for the Canada Pension Plan (CPP), the only programs being discussed are Old Age Security (OAS) and the Guaranteed Income Supplement. Just so there is no confusions CPP is ( for lack of a better description) a government mandated and run pension program that an individual contributes to throughout their working career and based on years of employment and overall contributions is entitled to draw a pension from upon retirement. OAS is an income supplement program with no direct contribution by individuals (other than taxes that we all pay) designed to for those that fall below certain retirement income levels, in simple terms a form of social assistance.

To fully grasp the suggestion of increasing the age of eligibility and it's implications we have to look at a bit of history.

A Canadian male born in 1966, the same year OAS was introduced would have had a life expectancy of about 68 years, today that very same male is expected to reach an average age of 79. As well, in 1966 when the OAS program first became reality, retirement at age 65 was more a function of the fact that a lifetime of labour had left an individual depleted, (for lack of a better term) and literally at the end of their productive working life.The end result was that in many cases a workers retirement years could be counted on one hand.

Now, let's fast forward to 2012, not only has the average life expectancy increased by over a decade (11 years to be exact), but in general as a society our health in later years is better, we exercise more, and our diet has improved. Many of the conditions of aging are treatable or can be managed resulting in a longer more productive life. How often have we all heard the phrase "50 is the new 40",or in some cases "60 is the new 40"!

In addition to this new found health is a new attitude. More than 80% of Canadians state that they would continue to work even if they had the financial means to retire and nearly 50% of those currently working expect to continue to do so past the age of 65. The interesting part is that this desire to continue to work is based on more that just economic considerations, many cite mental health reasons as their primary motivation to stay in the work force (staying mentally active, contact with co-workers, and they just enjoy their jobs).
Now based on this I fail to understand why all of the fuss about raising the age of OAS eligibility by 2 years The original program was designed and put in place at a time when the average worker was burned out by the age of 65 and it was anticipated that additional income would only be required for a relatively limited number of years. In Canada today neither of these conditions are the norm.

In fact I would suggest that the program is a dinosaur from days gone by and should be totally overhauled to reflect the current realities. I suspect that the Federal government is putting forward the age of 67 to test the waters for reaction, and not based on any actual common sense. Simply to reflect a longer life expectancy the eligibility age should be taken up to say 70. Such a move in theory would mean that based on a 1966 life expectancy after retirement of three (3) years and today's life expectancy of nine (9) years after the age of 70 the plan would provide coverage for 3 times the period it was originally designed to (certainly not a step backwards). Another relevant fact to bear in mind is this, currently there are four taxpayers for every senior in Canada, by 2030 there will be two taxpayers for every senior. Simply translated fewer contributing versus those receiving meaning additional financial strain on an already burdened system..

Unfortunately this is one of those arguments where common sense and facts play little role. No sooner had Canada's more left thinking got a "sniff" that there might be changes to OAS in the wind than they ramped up the rhetoric. Accusations are flying that the government wants to balance their budget "on the backs of seniors" and is callously neglecting them, good press but not very accurate.

What I am really curious about is this. If say in 50 years the average lifespan is pegged at 120 (humor me), does the average Canadian expect the government to support them for the last 55 years of their life? From where I sit Mt. Harper's suggestion is just a response to several changing conditions, a longer life expectancy and a growing percentage of our population retiring.

I for one am interested to see how this one plays out.


  1. Good post and informative. I imagine that because this is such a "hot potato" those fighting for the status quo will see victory on this one and Harper will back down. Too bad, as reform of our retirement system is required before it breaks down.

    Like you FJ I am interested to see how this one plays out.

  2. Sadly I have to agree with you. I too believe that this is such an emotional issue that facts and reason will be pushed aside as the left attempts to buy the senior vote by fanning the flames of fear. They will work hard to paint mental pictures of the retired eating cat food and shivering in the dark.

    All we can hope for is that the average Canadian has too much common sense to be fooled by that nonsense



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