The Canadian Institute of Actuaries (CIA) is urging the federal, provincial and territorial governments to raise the retirement age from 65 to 67.
The CIA, which represents actuaries in Canada, jumpstarted the discussion in a document published in April called Retire Later for Greater Benefits: Updating today’s retirement programs for tomorrow’s retirement realities.
The Institute recommends that legislators defer the age at which benefits should be paid, for all pension plans in place. This would ensure the viability of different plans while allowing Canadians to collect higher amounts at retirement, the organization says.
The CIA’s recommendations centre on:
- Old Age Security: a retirement age of 67 instead of 65 would let Canadians receive benefits 14.4% higher when they retire. “Based on the January 2019 level, this would increase the maximum monthly benefit from $601 to $688 (i.e., an extra $87).” They advocate a maximum postponed retirement age of 75 instead of 70.
- Canada Pension Plan (CPP) and Quebec Pension Plan (QPP): an eligibility age of 67 instead of 65 would translate into a 16% increase in Canadians’ retirement benefits. “Based on 2019 levels, this would increase the monthly target benefit from $1,155 to $1,349 (i.e., an extra $194).” The minimum early retirement would be raised to 62 instead of 60, and the maximum age of retirement should increase to 75 instead of 70.
- Registered Pension Plans and RRSPs: maximum age for starting to receive income from an RRSP should be increased to 75 instead of 71, and employees should be allowed to change the target retirement age to 67 instead of 65. “Later retirement options give more flexibility to Canadians for managing their retirement savings,” the CIA says.
The CIA is not calling for a sudden change in the retirement age. Instead, it recommends a smooth transition. ”Changes could be phased-in over time, for example, by increasing the target retirement age by three months each year from 2021 to 2029.”
The organization said it “would welcome the opportunity to work in partnership with government to refine this proposal.”
Longevity, cost of living …
For the Institute, deferring the retirement age is necessary to meet “tomorrow’s retirement realities.” This would let it reduce the longevity risk of public and private pension plans as Canadians’ life expectancy lengthens.
What’s more, the deferral would allow employers to make up for the labour shortage and help Canadians deal with retirement cost inflation, the CIA adds.