November 16, 2012
European-Style Pension Protests Avoidable With Gradual Implementation of Changes. New Mowat research on raising the pension age in Canada.
Toronto – The Mowat Centre at the University of Toronto has released a new research study which presents new data on the need to raise the age of eligibility in the Canada Pension Plan in order to ensure its financial health and inter-generational equity.
The paper, “Is ‘70’ the New ‘65’? Raising the Eligibility Age in the Canada Pension Plan”, demonstrates that pension changes implemented on a gradual basis have a higher likelihood of being accepted by Canadians than those foisted on some European countries without the public being sufficiently prepared.
“All governments face the challenge of continuing to fund social programs at historic levels during a period of increased life expectancy, impending labour shortages and significant budgetary deficits,” says Matthew Mendelsohn, the Mowat Centre’s Director.
“Raising the retirement age, if done properly, can contribute to long-term fiscal sustainability in a fair and equitable manner,” he adds.
A gradual increase in retirement ages as examined in this paper would increase the CPP’s assets by $982 billion by 2050, creating significant policy flexibility for governments to increase benefits or lower premiums.
Professor Thomas Klassen, one of the co-authors of the study says that the government has a limited number of options for reforming the system. Premiums, he says, are already at an all time high. To avoid reduced benefits, the only other viable alternative is gradually increasing the pension eligibility age.
“An increase in eligibility age distributes the costs of population aging more fairly between older, younger, and future generations. Increasing the retirement age strengthens the intergenerational contract upon which the CPP rests,” he says.
The riots in Europe, says Professor Martin Hering, the study’s other co-author, showed what can happen when a population is not sufficiently prepared for changes to the existing system.
“Those countries that have raised their eligibility ages gradually and with significant warning have not faced a political backlash. Pension reform can be a highly volatile public policy issue if governments do not plan properly.”
Professor Hering adds that it is odd that debates over the age of eligibility are taking place in most countries, yet Canadian policy-makers are not engaging with this necessary discussion.