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Legal Eagle: Sending out an SOS over OAS

On March 29, 2012, finance minister Jim Flaherty presented the government’s Economic Action Plan 2012 – more commonly known as the “federal budget.”


July 10, 2012
By Neil MacDonald

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On March 29, 2012, finance minister Jim Flaherty presented the government’s Economic Action Plan 2012 – more commonly known as the “federal budget.” Without getting into a debate with anyone over their political views of the budget, the one thing that caught my eye as a pilot, was the planned change to the Old Age Security program (the “OAS”).

The first pension plan started in 1927, establishing a “means-test” for benefit entitlement at age 70. A further change in 1965 dropped the eligibility to 65. Starting in 2023, the age of eligibility for OAS will increase from 65 to 67.

This may not seem like a great big deal considering the current maximum annual OAS pension is only $6,481, but more than 98 per cent of Canadians over 65 collect some portion of AOS.

Although this may not be a big deal for many Canadians who want to work past 65, what happens to pilots who may be required to retire as an aircraft commander at 60 – or possibly fully at 65? What happens to the years of lost earnings, before we can start to collect the full OAS?

In 2006, the International Civil Aviation Organization (“ICAO”) drafted an amendment to Annex 1, dealing with age limits for pilots:

  • 2.1.10.1 A Contracting State, having issued pilot licences, shall not permit the holders thereof to act as pilot-in-command of an aircraft engaged in international commercial air transport operations if the licence holders have attained their 60th birthday or, in the case of operations with more than one pilot where the other pilot is younger than 60 years of age, their 65th birthday.

Canada is a member state of ICAO, so limitations and recommendations apply to many of us. How are we going to square the ICAO formula with the introduction of the new budget formula?

It is clear the government feels Canadians should still be working past 65. It is not difficult to see why. Delaying the payment of benefits allows the government to collect more funds from others. In 2000, Canada’s population sat at around 30.5 million, with 12.5 million 65 or over. In 2011, it was 34 million, with 14.4 million at 65 or older. In 2000, the average life expectancy for Canadians was 79, now it is closer to 83.

If this trend continues – and experts tell us it will – fewer young people will be moving into the workforce to fund more retired people. This is not a sustainable scenario! The AOS is really a sophisticated, yet legal, Ponzi scheme – and any Ponzi scheme needs new investors to fund old investors or it will collapse – just ask Bernie Madoff.

Working Canadians pay more taxes than retired Canadians. More taxes means more economic buoyancy for the economy. I tend to agree with this thought process, but where does the rest of the world stand on aging workers?

According to the Organization for Economic Co-Operation and Development (OECD), Greece has the longest “pensionable years” statistic at 23.6, allowing workers to retire at 57 (could partially explain recent financial events). Estonians can retire at 63, and have the shortest pensionable years, at 14.9. Canada falls right into the OECD average at 18.3, with Australia right alongside at 18.6.

One of the main differences between Australia and Canada, however, is in the public/private pension scheme. Australia has focused some attention on its aging population and the public purse’s ability to fund retirement in the future. While Canada has a voluntary private pension program, Australia has a mandatory one. Why do I think this is important, and how does this tie into our government’s new 67 scheme?

Of the 34 countries in the OECD poll, 18 set retirement at 65, and only four have retirement after 65. Canada will be the fifth. If ICAO and the other nations on this list do not align their retirement ages, we pilots will need to be looking at financing our own retirements – at least in the short term.

Many schemes our government introduces see several changes before they actually affect Canadians. The new OAS benefit age is probably no different. I believe as pilots, we should all keep a close eye on this scheme because of its possible effect on our ability to earn income – retirement or otherwise!


Neil J. MacDonald is a B.C. lawyer. He has flown internationally as an IFR Off-Shore Aircraft Commander, locally as an Air Ambulance captain, and consulted on aviation issues in the Middle East. njm@neiljmacdonald.com This is not a legal opinion. Readers should not act on the basis of this article without first consulting a lawyer for analysis and advice on a specific matter.