C.D. Howe report warns of the cost of an aging population
The ticking timebomb of an aging population has been examined in a new report by the C.D. Howe Institute – and it’s not good news for young Canadians.
The report highlights that as older workers retire, Canada’s changing demographic will squeeze government budgets with a larger share of people receiving healthcare and seniors benefits, while fewer younger workers are contributing to the tax pot.
Along with education and child benefits, the report calculates that the cost of demographically sensitive programs will rise from 15.5% of GDP in 2017 to 24.2% by 2066. The unfunded liability for age-related social spending is $4.5 trillion, the report says.
The extra cost of seniors’ benefit programs would mean younger Canadians being forced to carry a larger tax burden just to make ends meet for the federal budget.
The report, by William B.P. Robson, Colin Busby, and Aaron Jacobs, has been summarized in a letter to federal finance minister Bill Morneau, and calls for the previous plan to raise the Old-Age Security threshold to 67 should be reinstated.
“The commitment to cancel that increase never made sense: other countries are raising their standard ages for social security payments, and the federal government’s own Advisory Council on Economic Growth has recently reinforced that message,” the letter says.
The authors say that the actuarial adjustments for OAS and CPP benefits should be kept up to date to reflect changing demography and provide appropriate rewards for working past the standard age of retirement.
They also call for an update on other age-related rules including the abolishing or raising of the ‘stop saving, start drawing’ RRSP limit from its current 71 years.
To help ease the burden on the federal programs, the report says that increasing the standard retirement age by 2 years over the next decade would save $600 billion.
The report highlights that as older workers retire, Canada’s changing demographic will squeeze government budgets with a larger share of people receiving healthcare and seniors benefits, while fewer younger workers are contributing to the tax pot.
Along with education and child benefits, the report calculates that the cost of demographically sensitive programs will rise from 15.5% of GDP in 2017 to 24.2% by 2066. The unfunded liability for age-related social spending is $4.5 trillion, the report says.
The extra cost of seniors’ benefit programs would mean younger Canadians being forced to carry a larger tax burden just to make ends meet for the federal budget.
The report, by William B.P. Robson, Colin Busby, and Aaron Jacobs, has been summarized in a letter to federal finance minister Bill Morneau, and calls for the previous plan to raise the Old-Age Security threshold to 67 should be reinstated.
“The commitment to cancel that increase never made sense: other countries are raising their standard ages for social security payments, and the federal government’s own Advisory Council on Economic Growth has recently reinforced that message,” the letter says.
The authors say that the actuarial adjustments for OAS and CPP benefits should be kept up to date to reflect changing demography and provide appropriate rewards for working past the standard age of retirement.
They also call for an update on other age-related rules including the abolishing or raising of the ‘stop saving, start drawing’ RRSP limit from its current 71 years.
To help ease the burden on the federal programs, the report says that increasing the standard retirement age by 2 years over the next decade would save $600 billion.
