We have two retirement ages: the one Canada set and the one Canadians use | Canada Voices

Canada’s official retirement age was set at 70 in 1927, when the federal government first established the Old Age Security pension.

It was lowered to 65 in 1965, when the Pearson government launched the Canada Pension Plan (CPP) and extended the same threshold to the Guaranteed Income Supplement two years later.

Former prime minister Stephen Harper legislated an increase in the OAS eligibility age from 65 to 67 in his 2012 budget, with a phased implementation set to begin in April, 2023. His successor, Justin Trudeau, reversed the change in 2016 before it ever took effect, so the number has not moved in 60 years.

What has changed dramatically is life expectancy. In 1965, a Canadian could expect to live to 72. Today that figure is 82. The retirement age and life expectancy have grown apart by 10 years since the threshold was set.

That divergence shows up in a more telling number: the unofficial retirement age, defined here as the age at which half of a given age group has left the work force. About 80 per cent of Canadians aged 55 to 59 are currently in the labour force.

With labour participation falling to around 60 per cent for the 60-to-64 cohort, 30 per cent for those 65 to 69, and roughly 8 per cent for those over 70, the halfway point likely falls around age 67 or 68.

The trend has not always been upward. Participation among Canadians aged 65 to 69 hovered near 15 per cent in 1979, fell to around 11 per cent by 2000, then climbed sharply to roughly 30 per cent today. The rise in the past 25 years reflects both financial pressure and better health.

Many seniors have not built adequate retirement savings. Those with significant home equity can downsize or use a reverse mortgage to fund retirement, but for those without it, CPP and OAS are often the primary income source.

The incentive to delay is real: CPP benefits rise 8.4 per cent for each year of deferral after 65, and OAS increases 7.2 per cent per year up to age 70. For someone without a strong pension, the benefits of holding off for a couple of years can be compelling.

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Mandatory retirement was also eliminated across Canada through the 2000s, and in knowledge-intensive industries, experienced workers often remain in demand well into their late 60s.

At $80-billion a year and 15 per cent of federal program spending, the Old Age Security program and its related benefits are already one of Ottawa’s largest expenditures, and it will only get bigger as the last group of baby boomers age into eligibility in the next few years.

Many Canadians are already working longer out of necessity, the prospect of higher payments, or choice. Canada has not seriously revisited whether the official threshold should reflect that reality.

With life expectancy up 10 years since 1965, it may be time.

Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.