Top Tier Wealth Management for Successful Physicians

The History of Retirement: Retirement Planning for Physicians

By: Dave Somerville

The concept of formal retirement was first developed in Germany in the 1880s. At the time, Chancellor Otto von Bismark was facing a number of problems, including a very unhappy labour force, a civil service and an army full of aging and unyielding bureaucrats. Von Bismark solved both problems with one solution, by introducing government social benefits that included health insurance, accident insurance and an old age pension to commence at age 70.

The Canadian government established its first social program for the urban elderly in the 1920s In his election platform of 1926, Mackenzie King promised to introduce an Old Age Pensions Act. The Act was passed in 1927 and as a result, Canadians 70 years of age and older began to receive $20 per month, which was about 25% of the average industrial wage at the time. At the time, the average male life expectancy was only about 61 years of age. The pension was subject to a means test, not only of the pensioner, but of his family, as the government still expected the family to care for its elderly. At death, the government would actually try to recover the pension (plus interest!) from the estate of the deceased.

Canada’s retirement programs began to develop more substance in 1951 when Prime Minister Louis St. Laurent introduced Old Age Security (OAS). This program provided a universal pension of $40 per month to all Canadians aged 70 or more, and a similar amount to individuals aged 65 to 70 who passed a means test. Prime Minister Diefenbaker subsequently raised the amount, and added survivor and disability benefits to the OAS program in 1957.

In 1966, Prime Minister Lester B. Pearson lowered the OAS basic eligibility to age 65 and added a guaranteed income supplement for individuals with low incomes. He also introduced the Canada Pension Plan (CPP) which applies to all of the provinces and territories with the exception of Québec. Also in 1966, the Québec Pension Plan (QPP) was created. The most recent change to the OAS was in 2000 when benefits and obligations were extended to same sex common law partners as well.

While the OAS, CPP and the guaranteed low income supplement may seem like fully integrated pieces of legislation now, the history of the programs spans almost a decade in Canada and is sure to endure more changes as politicians and citizens alike push to further refine them.