Thursday, January 26, 2012

Canada: Economists Rekindle Debate about Raising Retirement Age to 70

Following up on recently published research, two economists from McMaster University economists are suggesting that demographic changes require raising the age of eligibility for the Canada Pension Plan to 70. According to press reports, future generations will "suffer the financial consequences" unless these changes are implemented, based on research by Byron G. Spencer and Frank T. Denton, published in 2011 ("Age of Pension Eligibility, Gains in Life Expectancy, and Social Policy").

As presented in the paper:
Canadians are living longer and retiring younger. When combined with the aging of the baby boom generation, that means that the “inactive” portion of the population is increasing and there are concerns about possibly large increases in the burden of support on those who are younger. We model the impact of continued future gains in life expectancy on the size of the population that receives public pension benefits. We pay special attention to possible increases in the age of eligibility and the pension contribution rate that would maintain the publicly financed component of the retirement income security system.
With no changes, by 2035, there will be only two people in the workforce for each person over the age of 65, instead of the four-to-one ratio currently existing, and that would require the contribution rate for CPP to double, from 6.4% to 12.3%.

Source: Toronto Star "Too selfish to retire? Economists urge pushing pension age to 70" (January 26, 2012); Hamilton Spectator "Raise pension age to 70: Mac study" (January 26, 2012)

No comments: