While there may be challenges with people living longer, Canada isn’t facing a retirement crisis, according to the Canadian Institute of Actuaries (CIA).
Prior to the change in the old age security (OAS)/Guaranteed Income Supplement (GIS) entitlement age, the cost of the programs was expected to increase from 2.3% of Canada’s GDP in 2010 to a peak of 3.1% in 2030. With the change to be fully implemented in 2029, the cost is expected to peak at 2.9% of GDP in 2023.
However, the organization believes there are other areas where policy-makers should take notice. Current legislation forces individuals to start withdrawing from registered retirement vehicles no later than at age 71. Given that Canadians are living longer, and that investment returns have been and are currently at low levels, the CIA says the government would be well advised to consider raising that age to provide more flexibility.
“While governments have made some progress in amending pension legislation and government programs to better accommodate phased retirement, a fresh look at these rules in order to make further progress would be a good idea,” says CIA president Jacques Lafrance.
The organization also recommends that DB plans that subsidize early retirement for government workers should be re-examined.
These incentives are costly and their impact is not well understood. And, in an era of increasing longevity, significant demographic shifts and a potentially shrinking workforce, the CIA believes they may not make much sense anymore.
In the next few months, the institute will be releasing final versions of the first-ever Canadian pensioner mortality tables, which confirm that Canadians who are members of pension plans are living longer than previously predicted.