OTTAWA, Nov. 1, 2013 /CNW/ - In contrast to mass protests a few years
ago in European countries (France, Italy, Poland and Spain, for
example) over governments' austerity packages lifting the retirement
age, Canadians barely raised an eyebrow when the federal government
moved the eligibility trigger for the Old Age Security (OAS) and
Guaranteed Income Supplement (GIS) benefits from age 65 to 67.
Despite this apparent lack of concern, the fact that we are living
longer will create challenges that must be overcome.
Jacques Lafrance, President of the Canadian Institute of Actuaries, said
today, "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. For example, a woman aged 65 in 2014
was expected to live another 22.1 years. The new table indicates a life
expectancy of 24.5 years. For a man aged 65, the number has increased
over 2.5 years to 22.5 years.
"Think about how living an unanticipated 2.5 more years might impact
your retirement saving strategy—or your employer's pension plan. These
changes are significant to Canadians, their employers, and their
According to Canada's actuaries, there may be challenges with increased
longevity, but we are not facing a crisis. Prior to the change in the
OAS/GIS entitlement age, the cost of the programs was expected to
increase from 2.3% of Canada's gross domestic product 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 gross domestic product in 2023.
However, there are other areas where policymakers should take notice.
For example, current legislation forces individuals to start
withdrawing from registered retirement vehicles not later than at age
71. Given that Canadians are living longer, and that investment returns
have been and are currently at low levels, the government would be well
advised to consider raising that age to provide more flexibility.
In fact, the concept of "retirement age" itself may be outdated. Many
older Canadians are making a gradual transition to retirement, working
part-time or for reduced hours. Our current regulatory environment was
designed in an era when retirement was a "cliff" event, with workers
moving immediately from full-time work to a complete cessation. M.
Lafrance added, "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."
Another concept that should be examined in light of increased longevity
is early retirement incentives. Many workplace defined benefit pension
plans subsidize early retirement. While these cover a declining
percentage of the private sector workforce, public sector plans cover
more than 80% of government employees, and almost all of them
incorporate significant early retirement incentives. This means that
government employees can generally retire earlier than their private
sector counterparts, with a full pension or one that is of greater
actuarial value. 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, they may not
make much sense any more.
Early retirement incentives for government employees are perceived by
many as being a sectoral inequity, and one which the taxpayers who foot
the bill may be increasingly reluctant to support.
M. Lafrance said, "Canada is in an enviable position compared with most
other developed countries as we are not facing a retirement program
crisis. However, we should not use that as an excuse to avoid important
policy decisions that will benefit all Canadians. When considering
changes, the governments should consider the effects on other public
programs and the overall retirement system, including how the measures
may affect positively or negatively our economy, now and in the
The Canadian Institute of Actuaries is the national organization of the
actuarial profession. The Institute is dedicated to serving the public
through the provision, by the profession, of actuarial services and
advice of the highest quality. In fact, the Institute holds the duty of
the profession to the public above the needs of the profession and its
SOURCE: Canadian Institute of Actuaries
For further information:
or to set up an interview with an actuary, contact Josée Gonthier, communications and public affairs, at 613-236-8196 ext. 106, or e-mail email@example.com. www.cia-ica.ca