More employees are working in retirement—and it’s not just about the money. A 2014 survey of Municipal Retirees Organization Ontario members revealed 28% of the 1,580 respondents have paid part-time post-retirement jobs. This is surprising, since all MROO members have a DB pension from the Ontario Municipal Employees Retirement System. So even seniors with a solid pension aren’t always ready to stop working.
Survey respondents say increasing retirement income was not one of their primary motivations in looking for part-time work after they retired. Almost 55% simply wanted to get out of the house, and 52% wanted to continue using the knowledge they had accumulated over their careers or keep their skills up to date. These statistics raise a key question: if pensioners are actively looking for part-time work after retirement, should employers encourage them to stay on the job by introducing a formal phased retirement program?
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The answer depends on supply and demand. Does the company face a deluge of upcoming retirements? For example, almost 40% of the OMERS active membership is age 50 or older. Most will be eligible for an unreduced pension within the next decade.
Are candidates with the necessary skills and experience available in the areas where the employer needs them? If qualified potential employees are not readily available, would incenting older workers be worthwhile?
Flex appeal
If responses to these preliminary questions indicate a phased retirement program may be worth considering, the issue, then, is how to convince older workers to postpone full retirement. Most MROO retirees chose to keep working for non-monetary reasons, but, in general, DB plan sponsors may have a harder time persuading retirement-age employees to extend their careers than employers offering a DC plan or other capital accumulation plan (or no retirement savings plan at all). The challenge is even greater when the DB plan includes early retirement incentives.
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Changes to the federal Income Tax Act, Pension Benefits Standards Act and some provincial pension legislation enabling eligible retirees to continue working and accruing pension benefits while receiving a partial pension can sweeten the prospect.
(Regulations regarding phased retirement under Ontario’s Pension Benefits Act are still pending.) However, sponsors must amend their plans to include phased retirement.
The current era of low inflation and low wage increases may also encourage phased retirement. Employees eligible for an unreduced DB pension may stay on part time for another few years, knowing even if they stay on full time, their best five years are not going to be much better than their last five. They won’t lose as much pension by going to part-time employment as they would if wages rose quickly. Since they continue to accrue pension benefits, they see more flexible part-time employment as nullifying any pension loss.
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Retirement income adequacy aside, MROO members want flexible work arrangements to travel, care for family members, spend the winter in a warmer climate and pursue their own interests. Successful phased retirement must be tailored to individual needs and preferences in terms of working hours and non-work responsibilities.
If the work is interesting, the terms are flexible enough and the pension benefits continue to accrue, older workers may be enticed to delay full retirement. For organizations facing a tidal wave of upcoming retirements, phased retirement arrangements may mean the difference between sinking and swimming.
William Harford is president of the Municipal Retirees Organization Ontario.
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