Budget: Government confirms plan to raise pension eligibility age
Starting in 2023, the age of eligibility for OAS benefits will gradually increase to 67 from 65
OTTAWA — Canadians under the age of 54 will be forced to wait longer to qualify for their Old Age Security pensions, Finance Minister Jim Flaherty announced Thursday.
The controversial shift means that starting in 2023, the age of eligibility for OAS benefits will gradually increase to 67 from 65.
With an 11-year “notification” of that change and a six-year phase-in that concludes in 2029, Flaherty said he has given Canadians “ample time to make adjustments to their retirement plans.”
Flaherty also announced a new measure that will permit Canadians to delay claiming their OAS until later in life and, in return, be rewarded with higher benefits.
The purpose is twofold: keep Canadians in the workforce longer to boost the economy and provide taxes to government, and limit the costs of the OAS system by ensuring there are fewer beneficiaries.
In an apparent move to blunt some of the public uproar, Flaherty announced that pension plans for public servants will be changed to require that the employees pay a larger contribution: 50 per cent.
As well, the pension plan for politicians, often criticized as an overly generous “gold-plated” scheme, will be adjusted, starting in the next Parliament, so they are “comparable” with contribution rates made by public servants.
However, there were no details on precisely how much of an increased share the MPs will bear in contributions, or whether they will lose two attractive elements of their scheme — qualifying for benefits after just six years in office, and claiming the money at age 55.
The controversial shift in OAS, the backbone of Canada’s public pension system, was first telegraphed by Prime Minister Stephen Harper in January but details didn’t come until Thursday.
Flaherty argued the changes are needed to ensure the long-term sustainability of the pension system. Opposition parties say he is creating a “false crisis” and will mount fierce criticism.
Flaherty told the Commons Thursday the OAS program was designed decades ago for a “much different demographic future.”
In the 1970s, there were seven workers for every one person over the age of 65, he said. In 20 years there will be only two.
Similarly, in 1970, life expectancy was age 69 for men and 76 for women. Today, it is 79 for men and 83 for women.
“The result is that Canadians are living longer and healthier. There are fewer workers to take their place when they retire. Canada has changed. Old Age Security must change with it, to serve the purpose it was intended to serve,” Flaherty said.
The changes are as follows:
• Starting on April 1, 2023, the age of eligibility for OAS and the Guaranteed Income Supplement (GIS) will gradually change to 67 from 65.
• This means anyone who is 54 years or older as of March 31, 2012 will not be affected.
• People born between April 1, 1958, and Jan. 31, 1962, will become eligible to receive OAS benefits between the age of 65 and 67, depending on their actual birth date.
• People born between on or after Feb. 1, 1962, won’t be eligible for OAS until age 67.
• Eligibility for the allowance given to low-income spouses or survivors will gradually increase from 60 to 64 today, to 62 to 66, starting in April 2023.
• People can voluntarily defer receiving their OAS benefit for up to five years, starting July 1, 2013. If so, they will be subsequently rewarded with a higher, actuarially adjusted pension. For instance, someone who defers retiring at age 65 for one year (to age 66) would receive $6,948 in the annual OAS pension instead of $6,481.
In recent weeks, political critics have said the OAS changes will merely offload costs to the provinces, because more seniors will be forced onto provincial welfare rolls when they turn 65.
Flaherty has responded by promising to “compensate” the provinces for any “net additional costs” they face as a result of the change in OAS eligibility.