DUNSTAN: Raise the age of pension eligibility!

William Dunstan is a Young Voices contributor and a Master of Public Policy candidate at the University of CalgaryFew Canadians take Ontario MP Chandra Arya’s bid to replace Justin Trudeau as Liberal leader seriously. That’s fair: Arya has no chance of winning. But what Canadians — and other politicians — should take seriously is Arya’s pledge to increase the retirement age from 65 to 67. This is a smart policy, and one that’s long overdue. It can also be a political winner in the next election.The case for raising Canada’s retirement age is simple. Our demographic reality has changed since public pension programs like Old Age Security (OAS) and the Canada Pension Plan (CPP) were introduced. The age of eligibility for these benefits needs to change accordingly. When OAS and the CPP were created in the 1950s and 1960s, Canadians aged 65 could expect to live about another 15 years. Today, life expectancy at age 65 is more than 20 years. And seniors aren’t just living longer; they represent a larger share of the population too. Seniors were less than 10 per cent of the population in 1970. Today, they are 20 per cent of Canada’s population — and that number will be 23 per cent in 2040. As a result, these programs are being asked to support elderly Canadians for longer than they were designed to, while being funded by a proportionally smaller working-age population. And these programs are expensive. Public pensions already account for one-sixth of federal program spending, and costs are only going up. Spending on OAS alone is projected to increase from $77.8 billion in 2023 to $136.6 billion in 2035 and $276.5 billion by 2060. That will be a heavy burden for Canadian taxpayers over the coming decades. Doubly so when you remember that taxpayers will also be asked to pay for the growing healthcare needs of an aging population, along with growing demands for spending on defence and other priorities in an increasingly unstable world. Because Canada spends so much on public pensions, they are an area where a fiscally responsible government can find big savings. In 2012, the Harper government unveiled a plan to increase OAS eligibility from 65 to 67, starting in 2023. This would have saved taxpayers $10 billion every year once fully implemented. In 2016, however, the then newly-elected Trudeau government scrapped this plan.Because the CPP is funded directly through contributions, it doesn’t have the same impact on government finances. Still, a CPP with a higher age of eligibility could charge lower premiums and take less money out of Canadians’ pay cheques.Beyond direct savings for taxpayers, raising the age of eligibility for OAS and the CPP would boost our economy by encouraging people to work longer. As Canada’s population ages, we will have fewer people working and paying taxes relative to the number drawing on public services. Extending Canadians’ working lives would cushion our economy against these challenging demographic trends. It is for all these reasons that other countries have started raising their retirement ages. The United States is moving to 67, and the United Kingdom is increasing theirs to 68. Canada has now fallen behind its peers in modernizing the retirement age to reflect new demographics.Raising the retirement age is often a tough sell politically, but the U.S. and U.K show it can be done. Moreover, now may be a particularly opportune moment for politicians brave enough to propose these reforms. Getting the federal budget in order and improving the economic prospects of younger Canadians are set to be major issues in this year’s federal election. Both Pierre Poilievre and the next Liberal leader will seek to convince voters that they have the best plan to address these challenges. Presenting a concrete policy to limit growth in government spending and strengthen Canada’s economic future would make their case more credible.Our public pensions were not designed to support the average retiree for more than twenty years. And they are certainly not meant to do so for a quarter of the population at once. It is past time to raise Canada’s retirement age. If Chandra Arya accomplishes anything in the Liberal leadership race, hopefully it is bringing enough attention to this issue to force the real contenders for prime minister — Liberal or otherwise — to commit to bringing Canada in line with its peers, or face hard questions over why they won’t.William Dunstan is a Young Voices contributor and a Master of Public Policy candidate at the University of Calgary. He has written for prominent Canadian think tanks on topics including demographics, economic growth, and rural development. Follow him on X @wc_dunstan.