Old Age Security costs set to hit $276 billion as Ottawa defends retirement age at 65

CALGARY — Ottawa is defending its decision to keep Old Age Security (OAS) eligibility at age 65 despite projections that pension costs will more than double over the coming decades, arguing that raising the age would have pushed thousands of low-income seniors into poverty.According to a Department of Employment briefing note obtained by Blacklock’s Reporter, roughly 20% of Canadians aged 65 and 66 depend on Old Age Security and Guaranteed Income Supplement (GIS) payments for most of their income.“A department study shows approximately 20 percent of 65 and 66 year olds rely on Old Age Security and Guaranteed Income Supplement benefits for a majority of their income,” the note stated. Officials warned that increasing the eligibility age would have significantly increased the number of seniors in that age group living on low incomes.The issue resurfaced in an internal briefing titled Old Age Security/Guaranteed Income Supplement Age Eligibility, which revisited the debate over whether Canadians should wait longer before qualifying for benefits as the population ages.Parliament passed legislation in 2012 to gradually raise the OAS eligibility age from 65 to 67, a move projected at the time to save $10.8 billion. The change was scheduled to take effect in 2029.Former Chief Actuary Jean-Claude Ménard argued the rising cost of pensions was unavoidable as Canada’s population ages and baby boomers move into retirement.“The retirement of the baby boomers over the next few decades is projected to increase the expenditures of the program,” Ménard wrote.In a 2019 submission to a Montréal conference hosted by the Institute for Governance of Private and Public Organizations, Ménard said retirement costs would continue to climb as Canadians live longer. Current life expectancy for Canadians at pension age is 84 for men and 87 for women..Liberals dropped seniors' pension index plan after costs projected to top $300 million .However, the Liberal government elected in 2015 reversed the planned increase and restored OAS eligibility to age 65 the following year.“It’s not very hard for a country as rich as Canada to have a retirement system that can help the people who need it most,” then-finance minister Bill Morneau said at the time.The latest departmental briefing defended that decision, noting that vulnerable seniors aged 65 and 66 would have faced a substantially higher risk of poverty without access to benefits.“Given population aging, we should be trying to increase the age of retirement,” the briefing note acknowledged before posing the question: “Why did you restore the age of eligibility for Old Age Security to 65?”The department’s response was blunt.“Vulnerable 65 and 66 year old seniors depend on this support and without it would have faced a much higher risk of living in poverty, which is not acceptable,” the note said.Federal figures show seniors will account for nearly one-fifth of Canada’s population this year, representing approximately 8.4 million people. That number is expected to rise to 12.6 million by 2060.The financial burden is projected to grow accordingly. The Chief Actuary estimates OAS expenditures will rise from current levels to $136.6 billion by 2035 and reach $276.5 billion by 2060.The briefing note also projects OAS spending as a share of the economy will climb from 2.8% of GDP in 2025 to a peak of 3% in 2033 before stabilizing.

Old Age Security costs set to hit $276 billion as Ottawa defends retirement age at 65

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