The federal government’s recent decision to raise the eligibility age for Old Age Security (OAS) to 67 from 65 is an absolute must—but it’s also too timid, says Yves Guérard, an actuary and the author of a new publication from the Montreal Economic Institution (MEI).
In his MEI paper, A new paradigm for retirement, Guérard says that, since 1951, life expectancy at 65 has increased from 13 to 18 years for men and from 15 to 22 years for women. Meanwhile, the age of eligibility for pension benefits was reduced from 70 to 65 in the 1960s.
Guérard says that the reform proposed in the 2012 budget only partially corrects this anomaly. In order to avoid having a political controversy erupt over this issue with each new generation, he suggests a more dynamic approach in which the age of eligibility increases automatically as a function of longevity.
“We need to find a balance between years worked and years of retirement,” said Guérard. “To keep the burden of pension benefits from becoming unbearable, increases in longevity must be accompanied by increases in years worked….Furthermore, it is essential that we encourage ongoing training so that workers remain productive longer.”
Data from the Organisation for Economic Co-operation and Development OECD show that in countries where the employment rate for older workers is high, there is also high employment rate for younger workers—and that where one is low, the other is also low. This is at odds with the perception that the old are taking jobs away from the young, says Guérard. On the contrary, a society tends to be more dynamic when workers who have accumulated experience and developed skills remain active longer.
“The linear conception of the stages of life also needs to change,” said Guérard. “There used to be a fairly clear distinction between education, career and retirement. More and more, however, these stages overlap and retirement is being transformed into old age insurance. Already, 54% of Canadian workers see themselves working after the age of 65, either part-time or full-time. This represents a profound shift in the way people think about retirement.”