November 15, 2010
Raising the Eligibility Age in the Canada Pension Plan
Canada faces demographic pressures from an aging population, labour market shortages and increased life expectancy. Yet, notwithstanding some recent reforms, public policies—including the eligibility ages for the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP)—favour low retirement ages and access to early retirement benefits. This paper presents new data on the fiscal impact of gradually raising the age of eligibility for retirement benefits in Canada. A gradual increase in retirement ages as examined in this paper would increase the CPP’s assets by $982 billion by 2050.
Executive Summary
Canada faces demographic pressures from an aging population, labour market shortages and increased life expectancy. Yet, notwithstanding some recent reforms, public policies—including the eligibility ages for the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP)—favour low retirement ages and access to early retirement benefits. This paper presents new data on the fiscal impact of gradually raising the age of eligibility for retirement benefits in Canada. A gradual increase in retirement ages as examined in this paper would increase the CPP’s assets by $982 billion by 2050.
Canada is in the midst of an emerging debate on how to ensure Canadians have adequate retirement income. The federal government and many provincial governments have proposed increasing CPP premiums to fund an increase in CPP payments. This paper does not engage with these issues but highlights an important missing piece in the debate: raising the normal age of retirement through changing pension eligibility rules. Raising the eligibility ages in the CPP and QPP from 65 to 67 (and earliest age for collecting benefits from 60 to 62) would provide governments with the policy flexibility to ensure Canadians have adequate retirement income and help ensure that the fiscal costs associated with labour market shortages and longer life expectancy are borne more equitably across generations.
Many Canadian policies, including the eligibility ages for the CPP, as well as tax subsidies both for occupational and for personal pensions, encourage early retirement. This paper begins to explore how Canadian governments can begin to change this incentive structure so that Canadians work longer. Raising the normal age of retirement through changes to retirement benefits would be an important first step and could be undertaken in a manner that minimizes disruption to individual Canadians.
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Martin Hering
Thomas R. Klassen
Release Date
November 15, 2010
ISBN
978-0-9867464-5-1
Mowat Publication
No. 13