A new research study released by the Mowat Centre at the University of Toronto examines the fiscal impact of gradually raising the minimum eligibility age for Canada Pension Plan/Quebec Pension Plan (CPP/QPP) benefits.
The paper—Is 70 the New 65? Raising the Eligibility Age in Canada, by Martin Hering and Thomas R. Klassen—suggests that raising eligibility for CPP/QPP from 65 to 67, and the minimum age for collecting benefits from 60 to 62, would allow governments to ensure that intergenerational equity is maintained in funding the future of these programs. The paper indicates that life expectancy has increased by about 10 years for men and eight years for women since CPP was introduced in 1966, and that those born in the 21st century will have a life expectancy estimated at between 90 and 100 years. “Programs that were expected to fund people for 15 years cannot adequately support people for 25 or 30 years,” the authors write.
Hering and Klassen argue that, unlike the sudden eligibility increases governments have begun implementing to wide dissent in countries such as France, increasing the CPP/QPP eligibility age incrementally over a number of years would ease taxpayer acceptance of the changes, while also increasing assets by $982 billion by 2050.
Hering, a political science professor at McMaster University, says the recent unrest in Europe over plans to raise eligibility ages shows what can happen when people are not prepared for changes to the existing system.
“Those countries that have raised their eligibility ages gradually and with significant warning have not faced a political backlash. Pension reform can be a highly volatile public policy issue if governments do not plan properly,” he says
Klassen, a professor of political science at York University, says the government has only a few options at its disposal to effectively reform the system, including raising premiums and reducing benefits.
“An increase in eligibility age distributes the costs of population aging more fairly between older, younger, and future generations. Increasing the retirement age strengthens the intergenerational contract upon which the CPP rests,” he says.
However, the paper cites a 2004 study by the federal Policy Research Initiative, which found that one in five Canadians surveyed would be opposed to an increase in eligibility ages. Support for an increase in premiums was even lower, at just 20 of those surveyed.
The key to successfully implementing an eligibility increase, the authors conclude, is to begin immediate public discussions on the issue.
“It is odd that debates over the age of eligibility are taking place in most countries, yet Canadian policy-makers are not engaging with this necessary discussion,” says Hering.
“It is odd that debates over the age of eligibility are taking place in most countries, yet Canadian policy-makers are not engaging with this necessary discussion,” says Hering. Read the full report.
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