The changes to pension benefits proposed by the Harper government have left many of us with a troubling question – “Who really benefits from these changes?” According to the proposed legislation, the purpose of these changes is to put OAS on a sustainable track to meet the challenge of the ageing population. The changes will affect CPP (Canada Pension Plan), OAS (Old Age Security) and GIS (Guaranteed Income Supplement).
The legislation is intended to head off the financial challenges associated with our expanding senior’s population and also to help balance the budget. These changes focus mainly on the age eligibility rules that defer pension benefits – the eligibility age will be raised from 65 to 67 and benefits will increase. This paints a more positive image of the financial benefits future recipients will have by raising the age from 65 to 67 and increasing benefits. However, many commentators have argued the government is ‘kicking the can down the road’ by making the changes effective 2023. Could it be that the Harper government does not want to alienate a certain cohort of voters by this deferral? The changes will impact those currently under the age of 54 who will be retiring in about 10 years.
Although the deferral of CPP benefits is optional for seniors who qualify, the recipients who choose to take benefits at the qualifying age of 60 will have drastically reduced benefits. However, if seniors delay their benefits until age 67 they will have an advantage in terms of increased benefits payments. It appears, the government is waving a carrot to those who are considering taking CPP earlier than age 67. As mentioned above, deferring the implementation of the CPP changes for 2023 will definitely impact those who are currently middle-aged – i.e. under the age of 54. This group will find that raising the age of eligibility by two years will affect their financial plans hence will be forced to re-organize their long-term finances to secure their own pensions.
Of greater concern are the changes to OAS and GIS benefits. The deferral of OAS and GIS will have the most dramatic impact on those who qualify for these benefits — i.e. recipients of OAS and GIS are in the lower income bracket. They will have to wait for an additional 2 years to qualify for OAS and GIS benefits. Under the proposed legislation the seniors in this category will face financial hardship if OAS and GIS benefits are deferred. Will this vulnerable group be pushed into more poverty? Strangely enough some seniors in a higher income bracket who were eligible for the OAS but never bothered to claim these benefits will automatically receive these benefits without applying. Why was this change introduced if it will cost the government more? Refer to this link for more details: http://www.servicecanada.gc.ca/eng/services/pensions/oas/changes/index.shtml
While the OAS pensions changes are an attempt to reflect the changing demographics there isn’t much consideration to the fact that there will come a time when age-related health issues will burden health services. True enough many in the baby boomer cohort have embraced a more healthy lifestyle and are expected to live longer but as we age we also become more susceptible to more serious health issues associated with ageing. What about those retirees from high risk professions (e.g. manual labour, manufacturing, mining etc.) where injuries or serious long-term health problems are commonplace? Will they be around long enough to gain from the increased benefits that have been deferred? Will the health care system cover the health costs associated with illnesses caused by the type of professions they had? How long will the health care system be in place for low income seniors if the economy continues to stagnate? Will seniors on modest incomes eventually have to resort to costly private health coverage?
In this discussion about pension benefits the ‘gold-plated pension’ benefits for MPs should not be overlooked… that tab is picked up by taxpayers! There was a token attempt to convey the impression of fairness by the Harper government to spread the pain to MPs but it is not very convincing. When we look at how our pensions stack up against those of politicians we have to ask – “In what other profession can a worker expect to receive a minimum of $35,000 annual pension that MPs are entitled to receive after working for only 6 years?” Further, these politicians usually make sure to establish lucrative business contacts that eventually lead to well-paying positions in corporations or other government agencies after leaving politics. Refer to this link: http://www.cbc.ca/news/politics/story/2012/03/28/budget-pensions.html
Since seniors will have to remain longer in the workplace an obvious outcome of this deferral is the unemployment spike affecting younger workers – even today younger workers are vying with older experienced workers for jobs. Will there be sufficient jobs for the younger generation with the increased presence of seniors in the workplace? The most recent census data confirmed the demographic shift in our population distribution and gives sufficient notice to both government, private enterprise and social agencies that there could be challenging times ahead if better policies are not put in place to deal with the implications of the changing demographics.
The projected demographics are expected to become a reality and younger workers will have a challenging time finding work. They will not benefit from the deferral. Younger workers will have to finance their own pension benefits in a tightening economic environment since ’the can has been kicked down the road’. Hence the question remains – “Who really benefits from these changes?”