The debate whether governments and corporations should encourage early retirement or reward people for working past normal retirement age was rekindled after the federal government recently rejected recommendations by its own economic advisory council to raise the age of eligibility for Canada Pension Plan and Old Age Security benefits.
The advisory council said that current rules allowing Canadians to take reduced CPP benefits as early as age 60 and to start receiving OAS benefits at age 65 were not only costly to the government, but that raising the age of eligibility would increase the number of working Canadians and add $56 billion to the country's gross domestic product. The council reasoned that people are living longer, are healthier while doing so, and that technology now allows them to avoid physically-demanding jobs. It suggested the current increases in CPP and OAS benefits for those who delay receiving them should be enhanced.
But the Liberal government said it would stand by its policy of returning the age of OAS eligibility to 65 from the age 67 limit the previous Conservative government was going to gradually implement. The Liberals stated that delaying benefits could place many vulnerable seniors in poverty, and said that only people who are willing and physically able to work past age 65 should be enticed to do so through incentives.
In fact, Canada's aging population is working longer, one-third doing so out of financial necessity, while two-thirds work later in life for personal satisfaction plus mental stimulation and social contact. Some companies are allowing people approaching or reaching the normal retirement age of 65 to work out of their home, often as a resource or mentor for younger workers, and often requiring those working out of their home to report to the corporate office once a week to be updated on new projects or procedures and to meet new colleagues and keep in touch with old ones.
The latest Labour Force Survey by Statistics Canada reported people with post-secondary education in particular are retiring later, partly because people are enjoying their peak earning years later in life, with biggest wage gains now occurring between ages 45 and 54. The Boston Center for Retirement Research says workers in their 60s now earn 30 per cent more than comparable employees in 1990. Other aging workers are becoming self-employed or working part-time, with people age 55 and older taking 74,400 of the 80,000 part-time jobs created in Canada last year. Easing into retirement gradually rather than retiring cold turkey often avoids or delays dementia and memory loss.
A few years ago the federal government changed the rules for CPP. You receive 64 per cent of your earned benefits if you start taking them at age 60, 100 per cent if you start at 65, and 142 per cent if you begin at age 70. As a result, nearly two-thirds of people who started receiving CPP benefits in 2015 did so before age 65, some 28 per cent started at age 65, and only 5.7 per cent began at age 66 or later. As for OAS, you receive 100 per cent of benefits starting at age 65, and 136 per cent if you begin at age 70.
An unofficial reason the federal government dismissed the recommendation to delay the age of OAS eligibility is said to be a desire to increase our work force with young immigrants who are physically fit or technically savvy, rather than with people in their late 60s who struggle to swing a hammer or reboot a computer. ATB Financial quotes the 2016 Stats Can census saying Canada's population growth in coming years will be increasingly linked to immigration rather than an organic increase, primarily due to low fertility rates and an aging population. ATB added that “increased immigration should at least keep Alberta's homebuilders and construction companies working hard in the coming years.”
One thing governments could do for older workers is help those who find their employee benefits reduced or eliminated at age 65, even though they continue working at the same job. And in the end, people in most occupations should have some say in how late in life they work.
Ray Turchansky is an income tax consultant.
