Wednesday, March 28, 2012

Canada: Delayed Retirements will Increase and Gradual Changes to Retirement Age Should Follow

According to a report issued the C.D. Howe Institute, over the next 20 years in Canada, there will be "a strong trend towards later retirement by babyboomers as a result of social and economic pressures, without any policy action by government to raise retirement levels." Specifically, “Later Retirement: The Win-Win Solution” estimates that future retirees are likely to work five additional years on average.

Peter Hicks a former federal Assistant Deputy Minister, the report's author, says that this additional work effort will have large, positive economic and fiscal effects, the author reports, reducing pressures on growth, government finances and pension funding. While Hicks says that there is no immediate crisis in public pensions to be addressed, a key reform will be to gradually increase the standard age of pension eligibility in order to bring it more in line with increases in longevity. "For example, it makes no sense to continue with a standard age of 65 for public pension eligibility when the average retirement age will soon be 68."
“The trend towards later retirement will significantly reduce, although not entirely offset, the much-discussed negative macro-economic and labour-market effects of population aging,” says Peter Hicks a former federal Assistant Deputy Minister. “This suggests that compensating policy reforms are still needed but can be less draconian than has often been thought to be necessary.”
The largest problem Hicks perceives may be among a "relatively small number" of people those who cannot work longer and who might be negatively affected by changes in pension eligibility age, but he believes even this can be ameliorated by gradual changes.

Source: C.D. Howe Institute Media Release (March 27, 2012)

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