Economic analysis

The 2012 budget is in: No more pennies, OAS retirement at 67, $5.2 billion in cuts

Anyone born after February 1962 will have to start planning for freedom-67

The first budget for the majority Conservative budget promised to do away with the penny, raise the eligibility age for Old Age Security from 65 to 67 and slash $5.2 billion in spending, including 12,000 public service jobs.

There were few details of how exactly the government plans to slash its $245-billion in spending and balance the budgets by the promised 2015-2016.

But among the proposed changes are symbolic cuts, including the biggest shocker in the budget: the promise to scrap the penny and force businesses to round up to the nearest five cents, starting this fall. A cup of coffee that once cost $1.89 will now cost $1.90. A single penny costs 1.6 cents to make, the government says, although the savings from ending the one-cent coin will be a mere $1 million $11 million.

Other cuts include selling $80 million worth of overseas residences and asking foreign diplomats to move into “more modest quarters,” making the Governor-General to pay income tax, scrapping the Katimavik program that promoted cultural exchanges among young people and selling 160 vehicles owned by Environment Canada and Natural Resources.

Click here for all the latest news and insight on the 2012 federal budget

The changes to Old Age Security will mean little for anyone nearing retirement since the government doesn’t plan to start raising the age limit for another 11 years, starting in 2023. But starting in July anyone turning 65 can ask to voluntarily defer their OAS payments for five years and collect a higher cheque down the road, similar to the Canadian Pension Plan. Anyone born after February 1962, however, will have to start planning for retirement benefits at age 67.

Canadians on Employment Insurance, meanwhile, will be able to keep more of their money if they start working. The government says it’s planning to expand a Working While on Claim pilot project that will allow workers on EI to keep up to 50 per cent of their unemployment cheques when they get a job, up from 40 per cent now. It’s a move the government says it hopes will encourage more unemployed Canadians to take part-time jobs or those that pay less than EI.


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