Canada’s retention of the traditional retirement age of 65 is set to change. Legislators of the federal government noted last week a new policy whereby eligibility age for the Old Age Security (OAS) benefits will be on a gradual shift to 67 policy by the year 2030. The previous age for eligibility was 65. This bold policy decision seeks to address the sustainability of Canada’s pension system on a shifting demographic and social policy basis.
Rationale for the New Age Limit
The financial burden of supporting pensioners is increasingly becoming worrying due to the shrinking number of working adults, as Canada’s baby-boomer generation continues to age. The spending on public pension finance would be increased by raising longevity in the country, along with the net migration of people for older age. There is projection of 25 billion dollars net savings of the following decade, dedicated to the social services for the underprivileged.
Implementation of the New Policy
The age limit is set to change in 2026 and will continuously be increasing by 2 months until a set age of 67 is met in the year 2030. The changes, instead of occurring at once are to be gradual, this in an attempt to allow the working population to adjust.
The Impacts on Workers of Today
The OAS eligibility for workers aged 54 or younger will be set to 67 by 2025. Those who are 55 to 64 will have smaller increases, with a 6 month increase for the oldest of the cohort. Planners are suggesting that if in fact retirement gaps are in concerns, postponing personal investments or considering a phased retirement bridge is the most viable option.
The New Schedule of Eligibility
The table below illustrates the cohorts that will be affected with a change in retirement age for the specified cohorts.
New Reaction
The reaction to this change has been rather mixed. Older Advocacy groups are expressing concern that the transition will leave a gap for many Canadians who depend on OAS. On the other hand, business groups are in favor of the change, claiming that the older workers can be used to fill the gaps in the economy, boosting economic development.
Looking Ahead: Suggestions for Canadians
The recommendation from financial advisers is that Canadians need to start planning as soon as possible. Increased contributions to the RRSP or TFSA, working after 65 years of age, or utilizing home equity can serve as additional security. Flexible retirement policies, retirement phase programs as well as other aids can be used to ease the burden on the workers.
What Comes Next
The administration will assess the policy’s impact biennially, analyzing the savings generated and the state of the labor market. Any modifications will depend on the direction of demographic changes, if any. For the time being, Canadians know when they need to prepare for a lengthened working lifespan, and the changes that will need to be made to the pension system.