Sunday, March 28, 2010

Old Age Pensions: A Bottomless Pit?

Most of us don't really pay attention to pensions until we reach a certain age when we start looking at what we're going to do with our time after retirement (or a version thereof). Generally speaking, pensions are earned over the course of time working in Canada…and according to the current version of the Old Age Security Act…that time must be a minimum of 10 years before one can claim the pension once they reach the age of 65.

Say hello to Bill C-428, an Act to amend the Old Age Security Act aimed at reducing the wait time from 10 years to 3 years. The reason? "Whereas the current ten-year residency requirement places undue hardship on recent immigrants who are seniors in that they are unable to adequately access old age security benefits;" (taken from the pre-amble of Bill C-428) Essentially, this Act will enable those seniors who had the opportunity to earn an income in another country to now immigrate to Canada at the age of 62 versus 55 before claiming old age pension.

Excluding special circumstances, this new Act will essentially open a Pandora's Box of financial strain on the public coffers who contribute to the Pension Fund. We know that the reliance on immigrants is becoming more so, as Canada's birthrate is lagging it's death rate…putting the Country at risk of a dwindling population. The influx of well-educated immigrants has helped Canada continue its dominance in the Global marketplace. The gap in the proposed change to the Old Age Security Act is that it is specifically targeting immigrants who are seniors, thereby encouraging those in their senior years to immigrate to Canada for the sole purpose of receiving a pension without having to contribute.

For quite some time, Canadians (and the US for that matter), have grappled with innovative solutions to minimize the impending impact of the tsunami of Baby Boomers entering their retirement years. An article published in 2006 by Pierre Fortin, a professor of economics and associate of the Canadian Institute for Advanced Research, touched on some of these very real impacts based on the current economy in 2006. Since then we've hit quite the economical speed bump in 2008, which by all accounts should have encouraged policy makers to re-think future decisions…but I don't think the message has reached everyone. The message then was that "…in 2020 (baby boomers) will be 60 to 75 years old. Most of them will have begun their retirement. Just as they entered the job market en masse…they will leave it in large numbers between now and 2025…The consequence is obvious: Our governments will be cash-strapped!"

Instead of commencing with actions which would manage our own self-created strain on the pension fund, the Government is choosing to open up the wallet further to ease user access. When Bill C-428 was introduced into the House of Commons for its first reading on June 18th, 2009 it passed with little fan-fare. Due to the prorogation of Parliament, the Bill "…is deemed to have been considered and approved at all stages completed at the time of prorogation…" Now the Bill is getting some attention from those most affected by the risks of exposure of more pensioners drawing from the fund than what was originally thought.

The time is ripe for social media activism to weigh-in on the proposed Act. If you've got a bit of time to review the issue, and feel it's unfair or requires some tweaking, don't delay and act today.

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