Old Age Security and sacred cows: a reality check
What difference does two years make? Quite a lot, apparently! A firestorm erupted when Prime Minister Stephen Harper's January speech in Europe mentioned an increase to Canada's retirement age from age 65 to 67.
The rhetoric was re-ignited when the latest federal budget made it official. The media focused on the "cost" to future retirees; the opposition parties pooh-poohed the very idea.
Retiring at age 65 was portrayed as an entitlement. That the change will only be implemented in 10 years made no difference. Nor did it matter that the number of pensioners will double in the next two decades. And the dramatic increase in life expectancy for pensioners since Old Age Security (OAS) was first introduced was relegated to footnote status.
Financial facts, it seems, can be blissfully ignored when dealing with sacred cows. "Canada's finances are not as bad as Europe's," was the rallying cry.
Meanwhile many of my younger acquaintances casually assume that OAS won't be there for them (although you wouldn't know it from how little they are setting aside for their old age). In comparison, delaying OAS for two years doesn't seem like much of an issue.
The concept of benefits after retirement at age 65 started in Germany in the 1880s, when few people lived that long. Canada's Old Age Security Act came into force in 1952. It's been amended many times. The age of eligibility decreased from 70 to 65 in the late 1960s. Benefits were extended to widows and widowers aged 60 to 64 in 1985.
In 1995 the Act was amended to allow pensioners to request that their benefits be cancelled. I wonder how many people have taken advantage of this? Likely only those whose income is so high that 100 per cent of their OAS is clawed back anyway.
Our democratic system encourages politicians to make promises with little regard to their fiscal consequences. Most citizens assess the federal budget based on "What's in it for me?" thus encouraging the charade.
Do we have the right perspective? I remember an uncle who did not apply for OAS until he was age 80. His philosophy? "God is taking good care of me. I have enough for my needs and have no reason to want more."
My uncle's attitude is rare in Canada today. Citizens are concerned about maximizing their benefits; foregoing so-called entitlements is almost unheard of. Who is right? Where does government fiscal prudence intersect with individual stewardship?
Canada is blessed in many ways. Our country—and most of its citizens—can afford to be generous. For now. But we have incurred massive debts along the way. With low interest rates, debt servicing isn't perceived as a big problem.
We assume there won't be a day of "Greece-style" fiscal reckoning for Canadians. But politicians know they need to cater to our "me first" attitude in order to be elected. Will the increase in the retirement age survive two elections? Or will democracy be its undoing? Only time will tell.
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