A new report is recommending the immediate increase of the trigger age for drawing down registered retirement savings, suggesting it should continue to rise with longevity.
The report, published by the C.D. Howe Institute, is targeting changes to age-sensitive programs, noting the expected budget crunch for Canadian governments as the workforce ages. It says the rules that dictate when Canadians can start receiving retirement income, as well as restrictions on saving for retirement past a certain age, can have an impact on when Canadians decide to retire.
“In the next few decades, Canadian governments will face a fiscal squeeze: rising demand for public services on one side and slower growth of government revenues on the other — and the provinces get squeezed hardest,” said William Robson, one of the report’s authors and president and chief executive officer of the C.D. Howe Institute, in a news release.
The report estimates that, as Canadians age and workforce growth slows, the total cost of programs such as health care, senior benefits, education and child benefits will rise from 15.5 per cent of gross domestic product today to 24.2 per cent by 2066, putting the present value of the unfunded liability for age-related social spending at $4.5 trillion.
The authors contend, however, that if Canadians work longer, their contributions to output and taxes would help ease the monetary strain. They also note that health and longevity has been improved to such a degree that many Canadians would be readily willing to work longer.
In addition to raising the trigger age at which Canadians can draw down from registered retirement savings plans, the report recommends restoring the previously planned increase to the normal age of old-age security eligibility to 67 and to offer the option to receive a reduced amount earlier, as with the the Canada Pension Plan. In addition, the report recommends that actuarial adjustments to OAS and CPP payable benefits need to stay up to date to make sure people are being rewarded for working past the age they could start receiving these benefits.
“Policy changes to enable later retirement would reduce the unfunded liabilities future finance ministers will otherwise need to confront, and brighten the fiscal futures of Canadians,” said Colin Busby, associate director of research at the institute and an author of the report.