Editorial: OAS reversal popular but not the right move

Cancelling the increase to the age of eligibility for old-age security was certainly a popular move.

The change, which quickly followed the Liberals’ election in 2015, reflected a pattern of reversing a number of policy changes implemented by the former Conservative government whose time had in fact come. Ending home mail delivery was another necessary policy reform around which the Liberals found they could easily score political points by promising to change course.

But when it comes to OAS, we now know that restoring the age of eligibility to collect benefits to age 65 will come at a steep financial cost. This summer, Canada’s chief actuary revealed that cancelling the increase in the age of eligibility to 67, which was to have occurred in phases starting in 2023, would mean one million more OAS beneficiaries by 2030 at a cost of $10.4 billion. That’s on top of the additional people who will receive the guaranteed income supplement by that year as part of the OAS reversal.

Read: OAS and GIS changes to raise program costs by $11.6B in 2030: report

The reversal is good news for retirement incomes but it isn’t so good for public finances. After the former Conservative government first revealed the change, the federal parliamentary budget officer challenged the notion that leaving the eligibility age at 65 was unaffordable. In particular, he cited Conservative restraint to provincial health transfers as providing a significant boost to the federal fiscal capacity to maintain OAS as is.

But with the economy languishing and the Liberals opening the spending taps in a variety of areas, $10.4 billion is a significant financial hit for just one change. Of course, $10.4 billion won’t be as significant in the context of a much larger economy by 2030, but it’s clear that, with a host of financial pressures, it’s a lot of money for the government to come up with.

On top of that is the fact that Canada is bucking the trend of boosting the retirement age in other countries. With populations aging, life expectancies increasing and many people able to work longer due to improving health outcomes, several countries are rightly taking action to lessen the financial burden by doing exactly what Canada had been planning to do with OAS.

Read: OAS eligibility reversal called ‘unsustainable,’ out of sync with other countries

In fact, according to the Organisation for Economic Cooperation and Development, a host of member countries have moved to boost their financial sustainability by implementing a longer working life. They include the Netherlands, where the retirement age for the basic pension will reach 66 by 2018 and 67 by 2021, according to a 2015 OECD report looking at pension systems around the world.

The OAS reforms were a necessary response to the societal changes both the public and private sectors are grappling with. Maintaining or improving entitlements is always popular, but that doesn’t make it the right thing to do.

Glenn Kauth is the editor of Benefits Canada.

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