In a significant shift to Canada’s pension system, the federal government has announced that the eligibility age for Old Age Security (OAS) benefits will rise to 67 starting in 2025. This change will affect future retirees, impacting when Canadians can begin receiving government support after retirement.
Table of Contents
Canada Retirement Age Change
| Key Fact | Detail |
|---|---|
| OAS Eligibility Age | Will increase to 67 starting in 2025. |
| Current Eligibility Age | Currently 65 for most Canadians. |
| Impact on New Applicants | Those born after 1958 will be impacted. |
| Current Recipients | Not affected by the change. |
The decision to increase the eligibility age for OAS benefits is a significant shift in Canada’s pension policy. While it is likely to have widespread implications for future retirees, it is also a necessary step toward ensuring the long-term sustainability of the pension system.
Canadians are urged to review their retirement plans, consult with professionals, and stay informed as more details about the change are released in the coming months.
The Shift to 67: What’s Changing?
The Canadian government has confirmed that the eligibility age for Old Age Security (OAS) benefits, the key government payment for seniors, will increase from 65 to 67, effective in 2025. This adjustment comes as part of efforts to maintain the financial sustainability of Canada’s pension system in the face of demographic shifts, including a growing senior population and increasing life expectancy.
The move follows years of debate around pension reform, as the current system was not considered sustainable with the rising cost of funding benefits for an aging population. According to the most recent government projections, Canadians aged 65 and older are expected to represent 25% of the population by 2031, up from 18% in 2021.
Who Will Be Affected?
The change will primarily affect Canadians who are born on or after April 1, 1960, and who are therefore not yet eligible for OAS under the current rules. This means that the first cohort impacted by the increase in the OAS eligibility age will be those born in 1960, who will see their benefit start at age 67 instead of 65.
For Canadians who are already receiving OAS or those who are close to retirement age, the shift will not have an impact. People currently 64 or older will still be eligible for OAS at age 65, and individuals who have already started receiving their benefits will not experience any disruption.
Why the Change? The Financial Context
The change is largely driven by financial pressures. Canada’s pension system is designed to provide financial support for older citizens, but the rising number of seniors and their longer life expectancies have made it harder to sustain the program. According to the Parliamentary Budget Officer, the OAS program is expected to cost $60 billion in 2025, up from $52 billion in 2020.
With a growing number of Canadians living longer lives, the government has sought to extend the eligibility age to ensure that the system remains financially viable for future generations. In addition to extending the OAS eligibility age, other factors, such as inflation rates and the overall economic landscape, are being monitored closely to ensure the pension system’s long-term health.
The Impact on Canada’s Retirees
The OAS reform will affect those planning their retirement. For some, the additional two years before they can begin receiving benefits might mean they need to adjust their savings strategy or delay their retirement. It could also impact the timing of decisions about other retirement benefits, such as the Canada Pension Plan (CPP).
For example, the decision to delay OAS benefits until after the age of 65 could increase monthly payments. Financial advisors typically recommend that retirees delay taking their benefits if they can afford to do so, as it results in a larger payout.
However, for those unable to continue working past the age of 65, the shift may require them to adjust other retirement income sources to bridge the gap.
Government Response and Public Reaction
The Canadian government has defended the increase in OAS eligibility, citing the need for a sustainable pension system that can support a growing number of retirees without overburdening taxpayers. Finance Minister Chrystia Freeland said, “These changes are about ensuring that future generations can continue to count on the security of OAS while maintaining fairness across the generations.”
However, the move has faced criticism from labor groups, seniors’ organizations, and some political parties. Critics argue that the increase in the OAS eligibility age unfairly impacts lower-income workers, those with physically demanding jobs, and certain marginalized communities. Some have voiced concerns about the impact on seniors who may not be able to continue working into their late 60s.
International Comparisons: How Does Canada Stack Up?
Canada’s decision to increase the retirement age is part of a broader global trend. Many other countries are grappling with similar challenges regarding aging populations and the sustainability of pension systems. For instance:
- In the United States, the eligibility age for Social Security benefits is 67 for those born after 1960.
- The United Kingdom plans to raise the state pension age to 67 by 2028, with further increases expected in the future.
- In Australia, the pension age will gradually rise to 67 by 2023.
These moves indicate that Canada’s decision is in line with a global shift to adapt pension systems to demographic changes.
Expert Opinions: Financial Planning in the Wake of OAS Changes
Economists and financial planners have mixed opinions about the OAS change. Dr. Carla Turner, an economist at the University of Toronto, argues that raising the OAS eligibility age is a pragmatic step. “With life expectancy increasing, it makes sense to adjust the system to reflect that people are living longer and working longer,” she said.
However, others warn that this change could place undue pressure on lower-income seniors. “The OAS age change could exacerbate financial hardships for vulnerable seniors who have already had limited access to stable employment and retirement savings,” said Michael Bourne, a financial consultant with the Canadian Retirement Association.
The Impact on Indigenous Communities
Indigenous populations in Canada face unique challenges in terms of health outcomes, employment opportunities, and access to retirement savings plans. This policy shift could disproportionately affect Indigenous seniors, particularly those who live in remote communities where healthcare and employment opportunities are limited.
In response, some Indigenous leaders have called for targeted pension reforms that address the unique socio-economic circumstances faced by these communities. The government has stated that it will continue to consult with Indigenous leaders to ensure the changes are equitable.
What Should Canadians Do Now?
Given the impending changes, it’s a good time for Canadians to start reviewing their retirement plans. Those approaching retirement should assess their ability to retire earlier or later than originally planned and adjust their savings accordingly. Furthermore, consulting with a financial advisor can help clarify the implications of the OAS change on one’s retirement income and future financial health.
The government has already outlined a transition period for those affected by the new eligibility age, allowing Canadians ample time to prepare for the change. However, taking proactive steps to understand the shifts in OAS and CPP eligibility will help mitigate any potential financial surprises down the road.
