The Age of Retirement

Jeffrey Simpson seems to favour the sensible option of CPP expansion, but also wants to raise the CPP retirement age.

“Curiously, there seems to be an aversion among governments to easing future retirement costs by raising the age of retirement. Australia, France and the United States have already done so, lifting the age for future receipt of public pensions. Other countries are pondering similar moves. In Canada, for reasons one presumes are all about political fear, the issue isn’t even on the table.

It’s an odd kind of blind spot, because the average life expectancy of Canadians has risen 4.3 years since the inception of the CPP in 1966. Since then, premiums and benefits have increased, the investment of the CPP money has been put in the hands of an arm’s-length investment agency, and now debate swirls again around benefits and payouts. We’ve been willing to modify other elements of the CPP, but no one apparently will touch the issue of raising the retirement age.”

He is off base on two counts.

First, while it is true that 65 is the age of retirement for the normal CPP benefit, the CPP rules are being changed so that there is a greater penalty for earlier take up from age 60, and a greater bonus for take up after age 65. In short, the actuarial assumptions on longevity are being incorporated into CPP benefit calculations.

Second, and more importantly,  life expectancy at age 65 greatly varies by class position. As Krugman and  Dean Baker have argued in the US debate over social security reform, it would be deeply unfair to postpone retirement for those at the bottom in order to pay for the costs of increased longevity which is mainly being enjoyed by those at the top of the heap.

Here is an extract from my earlier post documenting that Canadian life expectancy varies greatly by socio-economic status.

“A new Statistics Canada study puts solid new Canadian numbers behind the argument that inequality kills. They link income status in 1991 to mortality (deaths) between 1991 and 2001 and find that “compared with people of higher socio-economic status, mortality rates were elevated among those of lower socio-economic status, regardless of whether status was determined by education, occupation or income. The findings reveal a stair-stepped gradient, with bigger steps near the bottom of the socio-economic hierarchy.”

Some key numbers:

Canadians aged 25 and in the top fifth of the income distribution can expect to have 5.6 more years of life  than those in the bottom fifth, and 1.7 more years of life compared to those in the middle one fifth.  The gap between the top and bottom one fifth is 6.8 years for men, and 4.3 years for women.

Of Canadians aged 25, 78.1%  in the top one fifth can expect to survive to age 75, compared 61.0% in th bottom one fifth, and 72.7% in the middle one fifth.

Of Canadian men aged 25, just 50.6% in the bottom one fifth  can expect to  survive to age  75, compared to  72.4%  in the top one fifth .

http://www.statcan.gc.ca/pub/82-003-x/82-003-x2011004-eng.pdf