The 2007 budget proposal to increase the age limit for unwinding registered pension plans (RPPs) or RRSPs to 71 from 69 is not long enough, says Steve Bonnar, a principal with Towers Perrin.
“It’s not fully sufficient. Age 71 is still too young in an environment where we’re going to have labour shortages broadly,” he explains. “We’re currently seeing it in certain segments of the market and we want to encourage people as a society to encourage people working longer.”
“But with people living longer and longer, it makes sense not just to go back to where we were, but to go somewhere beyond that.” The increase is a reversal of the 1996 budget, in which the then-Liberal government reduced the conversion age limit to 69 from 71.
The change may have a small impact on plan sponsors, according to a briefing from Hewitt Associates: “If employers decide to extend the maturity age under their plans, plan amendments may have to be undertaken, unless current plan wording accommodates a change in the maturity age.”
And Bonnar says the change won’t make much of a difference to employers in the near-term. “In the long run it’s going to be good for employers, but right now I think those that are trying to keep people around are more concerned keeping people past 65 as opposed to keeping people past 71.”
Benefits Canada has a page with additional reaction and commentary to the budget. To read Budget 2007: Special Report, click here.
To comment on this story email craig.sebastiano@rci.rogers.com.