Age of eligibility should increase automatically: Report
The raising of the age of eligibility for Old Age Security benefits from 65 to 67, as announced in the last federal budget, is an absolute must but this belated adjustment is still timid, according to Yves Guérard, actuary and author of a new publication from the Montreal Economic Institute (MEI).
Since 1951, life expectancy at 65 has increased substantially, from 13 to 18 years for men and from 15 to 22 years for women. Meanwhile, the age of eligibility for pension benefits was reduced from 70 to 65 in the 1960s. The reform proposed in the last budget only partially corrects this anomaly, according to Guérard in A New Paradigm for Retirement.
To avoid having a political controversy erupt over this issue with each new generation, a more dynamic approach would be to have the age of eligibility increase automatically as a function of longevity, he said. Data from the Organisation for Economic Co-operation and Development (OECD) show that countries where the employment rate for older workers is high also enjoy a high employment rate for younger workers, and where the one is low, the other is also low. This is at odds with the perception that the old are taking jobs away from the young.
"We need to find a balance between years worked and years of retirement. To keep the burden of pension benefits from becoming unbearable, increases in longevity must be accompanied by increases in years worked that nonetheless allow for a better harmonization of work, leisure and quality time with family. Furthermore, it is essential that we encourage ongoing training so that workers remain productive longer,” said Guérard.
"The linear conception of the stages of life also needs to change. There used to be a fairly clear distinction between education, career and retirement. More and more, however, these stages overlap and retirement is being transformed into old age insurance. Already, 54 per cent of Canadian workers see themselves working after the age of 65, either part-time or full-time. This represents a profound shift in the way people think about retirement.”