Canada should consider upping the age when public pensions kick-in to help offset ballooning expenditures from an aging population, a new study suggests.
Currently, when Canadians turn 65 they become eligible to collect payments from the Canadian Pension Plan. But two economists from Hamilton's McMaster University say that the eligibility age should be raised to 70 because of longer life spans and a crunch in public money.
"The major factor is the aging of the baby boom generation," said study co-author Byron Spencer in a release.
According to statistical predictions, by 2035, there will be two workers for every person over the age of 65. Today, that ratio is four-to-one.
In the study, Spencer and his co-author Frank Denton suggest that Canada should gradually raise the pension age by five years, which could cut projected pension expenditures in half.
"There would be some resistance from the general public, but less so if the transition was done gradually," said Spencer.
The authors point to demographics and the extended life expectancy of Canadians as key indicators.
Since CPP was brought in back in 1966, the life spans of Canadian men and women have increased by 10 and eight years respectively, the authors said.
But that's not the only thing causing a cash crunch.
"Even though they're living longer, Canadians are retiring at younger ages and spending more of their lives in retirement," the authors said.
The study said similar proposals for raising pension eligibilities are being considered in Europe and the United States.
However, groups advocating for older Canadians have stated that CPP needs to be boosted because governments will eventually have to pay out larger sums for the Guaranteed Income Supplement and Old Age Security.
Both GIS and OAS are seen as key reasons why poverty among seniors in Canada is relatively low.
That concern was echoed by Prime Minister Stephen Harper on Thursday, who said that OAS could cause a serious financial burden in the coming decades as Canadians age.
"Our demographics also constitute a threat to the social programs and services that Canadians cherish," Harper said at the Davos at the World Economic Forum in Switzerland.
But he added that the Canada Pension Plan "does not need to be changed" since it is already fully funded.
Ted Menzies, who is the parliamentary secretary to Finance Minister Jim Flaherty, noted that many potential cost-saving plans are on the table.
"We're looking at the whole thing as a package and there will be some recommendations," Menzies told The Canadian Press.
