The federal government has put a plan into motion to keep older workers in the workforce longer—a move that it hopes will lessen the future labour shortage when the baby boomers retire.
The Federal Finance Minister Jim Flaherty has announced that as of 2012, Canadians will be allowed to draw their Canada Pension Plan (CPP) benefits as early as age 60—without having to leave their jobs or reduce their work hours—and will still continue to accrue benefits. However, a 7.2% reduction in CPP benefits will apply to each year that the benefit is taken before age 65.
According to a department of finance statement, the change could help individuals use income from the CPP to “phase into retirement or supplement their earnings.”
Those Canadians who choose to put off collecting CPP until age 70 will get a benefits boost of 42%. (Currently, those who wait until 70 get a 30% increase in benefits.)
Ottawa will allow Canadians to drop an additional low-earning year from the equation under which their pension benefits are calculated. According to the department of finance, this change is meant to benefit those whose careers suffer “more work interruptions” than usual.
“[These changes] will be significant for people at or around retirement age,” says Normand Gendron, chief actuary with Buck Consultants. “I think this is a set of positive changes because of what the retirement patterns will look like in the coming years.
“As the pattern of the population changes, [these changes] should be reflected in a pension plan that governs all working people. I think there will be more tweaks as the years go by.”
Gendron predicts that the next big change will be in the area of spousal and child benefits of deceased members. He says that the Canadian family has changed significantly since the inception of the CPP system in the 1960s and that this area of the CPP benefits is out of date with the current trends.
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