Raising the normal age for Canada Pension Plan eligibility by two years would allow benefits to remain undiminished and avoid contribution increases, a new report suggests.

A paper from the Mowat Centre for Policy Innovation at the University of Toronto, examines the effect of gradually increasing the normal age of eligibility for the Canada Pension Plan from 65 years of age to 67 (and earliest ages from 60 to 62). The paper finds that this “would provide governments with the policy flexibility to ensure that pension benefits do not have to be cut and premiums do not have to go up.”

The paper projects that such a change would mean that by 2050, CPP expenditures would be reduced by about $15 billion per year and contribution revenues would increase by about $5 billion annually.

“It is thus an effective measure for ensuring the financing of Canada’s public pension insurance programs in the face of unexpected economic developments and demographic trends, such as a possible increase in life expectancy,” the paper concludes.

“Increasing the eligibility ages is a fair solution for financing the costs of population aging, because doing so divides these costs across younger and older generations. It strengthens the intergenerational contract upon which the CPP rests,” the paper adds.

Additionally, the paper says that recent international experiences “show that workers will be prepared to accept an eligibility age increase if reforms are introduced gradually over time, and if they understand the alternatives.”

Gaining that public acceptance “will require evidence-based public dialogue, in combination with discussions about other policy instruments to encourage Canadians to stay in the workforce longer,” it says. “That conversation should begin immediately.”

IE