Liberals defied global trend in reversing OAS age eligibility

Posted on August 10, 2016 in Debates – News/Politics
Aug. 10, 2016.   BILL CURRY, Ottawa

The Liberal government reversed a policy to raise the eligibility age for Old Age Security to 67 in spite of arguments from bureaucrats that the move would be bucking a trend among developed countries.

Australia, France, Germany, Italy, Poland, Britain and the United States are among the countries that plan to raise their equivalent pension ages to 67 or higher.

That is the global context outlined for the new government in an internal policy paper, marked secret, that was prepared in September during last year’s election and makes reference to political promises related to seniors and pensions.

The Liberal Party’s campaign included a pledge to scrap the Conservative government’s plan to raise the OAS eligibility age to 67 from 65 by 2029. The new government delivered on this promise with its first budget, in March.

The public servants noted that reversing such a reform would be unusual. “Among the 34 OECD [Organization for Economic Co-operation and Development] member countries, 23 have announced increases or have already increased the age of eligibility for public pensions,” states the policy paper, which was released via the Access to Information Act.

It said that “no country has reversed its decision or lowered the age of eligibility.”

The paper was produced by the seniors and pension policy secretariat of Employment and Social Development Canada. It was presented to the deputy minister of the department.

“There is a trend toward introducing higher pension ages, and that retirement ages will be at least 67 by around 2050 in most OECD countries,” it states.

The first-year government has faced questions over the long-term fiscal consequences of its ambitious plans to enhance seniors’ benefits, boost infrastructure spending and negotiate a new health-care deal with the provinces and territories.

Parliamentary Budget Officer Jean-Denis Fréchette released a paper in April estimating that keeping the OAS age at 65 will cost Ottawa an extra $11.2-billion a year in 2029, representing about 0.35 per cent of gross domestic product. The PBO said Ottawa has the fiscal room to take on this expense without increasing its long-term debt load as a percentage of the economy.

However, the PBO has also warned that while the federal government’s finances are sustainable, provincial finances are not. That means Ottawa will be under pressure to increase transfer payments in areas such as health care.

The government has not yet produced a report outlining the long-term fiscal consequences of its recent policy changes, but it has promised to release one later this year.

Large sections of the 23-page policy paper are blacked out because of exemptions to access legislation that allow officials to block the release of advice to the cabinet. But over all, the released material appears to argue in favour of keeping the eligibility age at 67. None of the released text argues against it.

In a section called “rationale for increasing the age of eligibility,” the report notes that the aging of the baby-boom generation, a decline in the fertility rate and increased life expectancy are leading to major demographic changes.

“The OAS program was originally designed for a much different demographic future than Canada faces today. As the program is financed through general tax revenues on a pay-as-you-go basis, benefits from one generation of seniors are paid largely from the tax contributions of younger generations,” the report states, noting that keeping the eligibility age at 65 would would nearly triple the cost of the program, to $108-billion in 2030 from $38-billion in 2011.

“The change to the age of eligibility for OAS benefits was designed to respond to the realities of Canada’s aging population and alleviate some of the projected cost pressures on the OAS program,” the report states.

Conservative MPs have asked Finance Minister Bill Morneau why he rejected a higher age for OAS after arguing in favour of such a change in a 2012 book he co-wrote before entering politics.

“The approach taken to changing the Old Age Security by the previous government, in my estimation, was arbitrary,” Mr. Morneau replied in May before the House of Commons finance committee, adding that it was announced without consultation. “We don’t like that approach. We moved that back to 65 because we don’t want to do something in that way.”

Mr. Morneau’s office defended the decision to keep the eligibility age at 65 and said it was a clear campaign promise that has been kept. “It was absolutely the right thing to do,” spokesman Daniel Lauzon said.


How nations around the world are increasing their age of eligibility for pensions: < >

(By # Country, Increase In Age Of Eligibility, Year Announced & Phase-In Period)  EMPLOYMENT AND SOCIAL DEVELOPMENT CANADA

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