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Vera Howe, 61, seen at her home in Toronto on Jan. 27, 2012, works in social services and is concerned about how the possibility of raising the OAS eligibility age will affect retirement for her and her husband.

Ottawa is asking Canadians to rethink their senior years, sending a clear message that individuals must save more on their own for retirement.

Faced with an aging population that he claims poses a threat to our social programs and services, Stephen Harper unveiled an ambitious blueprint for change this week that takes aim at immigration, trade and energy policies. But perhaps the most ambitious – and controversial – of these changes will be in the area of retirement reform.

The obvious motivation is cost. The Prime Minister's Office and other government officials pointed reporters to the most recent actuarial report on Old Age Security, which estimates the cost of the program will climb to $108-billion in 2030 from $36.5-billion in 2010.

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But retirement expenditures are only one part of the challenge. One of the biggest obstacles posed by Canada's aging demographic is the labour force: keeping people working for longer. At the moment, there are 4.6 workers for every person over 65 in Canada. That ratio, known as the dependency ratio, is expected to drop below three-to-one by 2031, which would mean fewer people working and paying taxes to support social programs. Canadians also live longer now, so someone retiring at 65 can expect to collect a pension for nearly 20 years.

As Ottawa grapples with how best to reform the system, the question is not merely whether Canadians will have to shoulder greater responsibility for their retirement needs, but whether they will have to work longer as well.

Vera Howe, a 61-year-old Toronto mother and grandmother, said she and her husband were very upset by the Prime Minister's speech and the prospect of a raised age of eligibility for OAS.

She works with people with developmental disabilities. It's a physical job that requires a lot of lifting. Her husband is a tradesman who works in a factory and in recent years has suffered two injuries. She wants to retire at 65, but without OAS she'll be in financial trouble, she said.

"I would be in poverty," she said. "I couldn't even pay the mortgage. And I would still have a mortgage, mind you."

"You start working at 18 years old, you've worked this far only to see the goalposts moved away."

Canadians who pay into the Canada Pension Plan receive benefits, but unlike CPP, which has a pool of money behind it, the OAS program is paid out of government revenues. OAS eligibility is based on a senior's income.

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A day after Mr. Harper's speech in Davos, Switzerland, the Conservative government moved to address concerns, saying any changes would be phased in gradually.

The Conservatives never mentioned changes to Old Age Security during last year's election campaign, yet Ottawa confirmed Friday that it is looking at changes to OAS to make it financially stable over the long term.

Ted Menzies, the Conservative Minister of State for Finance who has held extensive cross-country hearings on retirement issues, said the government hasn't made a final decision on OAS changes.

"We're looking at many different options. I'm not sure just which ones are going to be viewed as being the most effective," he said.

"But we need to also remember that OAS was never intended to fund an entire retirement for anyone," he said. "There is responsibility on the individual to save for themselves."

Most Group of Seven countries are grappling with the problem of unfavourable demographics. While it is undoubtedly a challenge for Canada, University of British Columbia economist Kevin Milligan said the country is in a much better position in this regard than almost any of its G7 peers, all of which have already raised retirement ages or are debating the issue.

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"While we have a dependency ratio that's going in the wrong direction in Canada … the issue is not as big as it is for Italy, Germany, Japan. Those places have serious crises," he said. "That doesn't mean we shouldn't think about it though."

Don Drummond, a former senior federal Finance Department official who is now advising the Ontario government, said Ottawa will have to give Canadians "a hell of a lot of notice" before changing the eligibility year for OAS and the Guaranteed Income Supplement, and predicted there will be considerable social impacts if it is implemented.

Mr. Drummond said a 20-year time period – from initial notice to when it's fully phased in – is probably the shortest lead time that a country could give.

"I would think it would have to be 20 to 25 years before you are fully up to age 67," Mr. Drummond said.

"If you're 47 years old today, your life cycle of earnings is kind of set right now by what you've already done. It's not giving you a heck of a lot of time."

One potential solution to the demographic problem is tapping the potential of new Canadians, whose job participation is disproportionately lower than the country's average. By 2031, roughly 60 per cent of Canadians over 15 will be in the work force, down from nearly 67 per cent today, according to Statistics Canada. That would be the lowest rate since the 1970s. However, the report noted that if immigrants and visible minorities were to participate in the labour force at the same rate as other Canadians, that drop could be cut almost in half.

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Parliamentary budget watchdog Kevin Page says the 2012 budget – long before the next election – is a good place to "front-end load some of the tough decisions" on challenges Ottawa faces.

He said the Harper government's January, 2012, decision to restrict growth in health and social transfers to the provinces as of 2016 has improved Ottawa's fiscal prospects to the extent that Canada could afford to fund existing increases in OAS payments.

"We don't have a long-term sustainability problem," Mr. Page said. "I think he's doing it for broader problems."

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