Amid widespread protests in France over its government's plan to increase the age of retirement, one economist said it is unlikely that Canada will need to increase its retirement age.

While aging demographics present a challenge to businesses in Canada, the potential impact has been softened by immigration and people electing to work at increasingly advanced ages, James Orlando, the director of TD Economics, said in an interview with BNNBloomberg.ca last Thursday. 

“The fact that we have so many people coming in, we've done such a good job of attracting immigration, [that] has enabled us to be able to afford the supports to the older population of Canada,” Orlando said.

Additionally, there has been a substantial increase in people aged 60-70 years old choosing to work longer, due partly to changing incentives, he said.

“The fact that we've done things like eliminating the mandatory retirement age in certain provinces, the fact that we have a system in place where we've incentivized people to delay receiving things like Canadian Pension Plan benefits or even delaying Old Age Security benefits, that incentivizes people to not draw on [those benefits] but also work longer,” Orlando said. 

If these changes were not made, the federal government would have to allocate more money to support people that likely would have retired earlier, he said. 

As people live longer, Bill VanGorder, the chief operating officer and chief policy officer of Canadian Association of Retired Persons (CARP), said in a phone interview with BNNBloomberg.ca on Friday that people are not automatically choosing to retire when they reach the age of 65.

“And they shouldn't be forced to [retire at 65] in fact, we need them to keep working, because there's a lack of employees right across the country,” VanGorder said.

Canada’s 2023 federal budget included a 10 per cent increase in Old Age Security (OAS) payments. 

VanGorder said that the 10 per cent increase was expected and that the budget had “very little in it for seniors” and was “very disappointing.”

The increase will be accessible to people over the age of 75, which is something VanGorder said he finds concerning.

“Once again, they're making a two-tiered system for old age people. People between [age] 65 and 75 are not eligible for it,” he said.

“Our feedback that we're getting from our members and other older Canadians across the country is that the pressures of the increased cost of living these days are actually hitting the younger people, age 65 to 75, more than the older group [age of 75 and older].”

VanGorder said the people in the younger age group are generally more active, while the older group often live more sedentary lives.

In the 2012 federal budget, then prime minister Stephen Harper’s Conservative government planned to increase the minimum age to receive OAS support from 65 to 67 starting in 2023. 

In the 2016 budget, Prime Minister Justin Trudeau’s Liberals reversed that decision.  

Civil unrest began in France after President Emmanuel Macron moved to raise the minimum retirement age to 64 from 62 to bring the nation’s retirement age in line with other European countries. The two-year increase to the minimum retirement age is a necessary move, according to Macron, in order to address the country’s aging population and debt. 

FUNDING RETIREMENT 

Lisa Raitt, co-chair of Coalition for a Better Future, vice-chair of global investment banking at CIBC Capital Markets and former natural resources minister, said in an interview on March 29, that OAS payments and government-guaranteed income will cost about $60 billion this year. 

By 2027, Raitt said OAS costs will rise by around 50 per cent to $90 billion. She said there is not a “special trust” that currently exists to meet rising OAS costs and that funding will come from taxation. 

As Canadians age, Raitt said long-term care will become a significant issue that requires more attention. Germany and parts of the U.S. fund long-term care through a “payroll type tax,” she said, which is not something she advocates for. 

“It's just recognizing, we're going to have to have a separate fund to pay for that, and it can't always compete with people who want to have more money for the provision of services within a hospital,” Raitt said.

Orlando said the federal government will likely be able to continue to fund existing programs long-term, including retirement, as long as doing so doesn’t impact the federal government's fiscal anchor, the debt-to-gross domestic product (GDP) ratio. 

“For as long as debt to GDP is not increasing on an unsustainable path, then the ability for the government to be able to keep funding the programs they have in place is there,” he said. 

“So you're not having a day of reckoning where you have to make significant changes to your policy system for so long as you're able to make these ratios improve over time.”