Recommendation to increase retirement age under public plans

The government-appointed Advisory Council on Economic Growth has recommended that the age of eligibility for OAS, CPP and GIS be increased to “meet the reality of an ageing society and a considerably longer life expectancy”. The Advisory Council is a 14-member body that was handpicked by Finance Minister Bill Morneau back in March 2016, to suggest options to overcome the challenges posed by an aging population and improve economic growth. In their report, they point out that the workforce participation rate of Canadians over 55 is just 54 percent. By comparison, it is 62 percent for the top-performing OECD countries, including the US, Japan, Sweden and New Zealand.

It will be remembered that the Harper government had planned to increase the retirement age for OAS and GIS benefits from 65 to 67. One of the first actions taken by the Trudeau government was to cancel this change and preserve the status quo. So it was no surprise that Social Development Minister Jean-Yves Duclos was quick to reject that idea. Nevertheless, this latest report represents one more voice that could eventually put it back on the table, and the discussion then might be expanded to encompass the CPP.

Curiously, the Advisory Council made no mention of raising the eligibility age for pensions under workplace pension plans. The majority of workplace defined benefit plans allow for unreduced early retirement pensions from age 60 or 62 and sometimes as early as 55. As for reduced early retirement pensions, all workplace plans by law are required to allow commencement by age 55 and many allow an even earlier start date.

In some private sector workplace plans – and most public sector plans – a supplementary pension is also paid until C/QPP pensions become payable in full (at 65). If those plans are left unchanged, millions of their participants could be buffered from the effects of any change in retirement age under CPP. Then it could be mainly workers without workplace pension coverage who would be adversely affected by an increase in the eligibility age for OAS, GIS and CPP.

The Advisory Council also suggested to explore ways to make deferrals beyond age 65 more attractive, pointing out that allowing deferrals beyond age 70 could encourage some workers to continue working longer.


Conclusion

It is still early days for such changes, but they have also been suggested by others. We may see very soon in the next federal budget whether the government intends to focus on other ways to encourage older workers to keep working longer.


News & Views - February 2017 (PDF)