For generations, the concept of retirement centred around a one-time event: you worked to age 65, then your employer sent you off with a gold watch and your DB pension. But just as DB pension plans have begun to fall out of favour in recent years, so, too, has the concept of retirement changed.

“It used to be that people thought, ‘I’ll never last to 65, and, if I do, I’ll be almost dead,’” says Serge Charbonneau, a partner with Morneau Shepell. “But people don’t say that anymore.”

In 1997, Quebec became the first jurisdiction in Canada to allow for a phased transition to retirement, with the passage of amendments to its Supplemental Pension Plans Act. The changes allowed employees to reduce their working hours and begin to draw a percentage of accrued DB pension benefits to supplement their income, while still contributing to their plan. When the employee fully retired, his or her pension would be reduced to account for the early payments.

Charbonneau, then vice-president of pension consulting with Aon Corp., said that the changes came during a period where lengthening lifespans and volatile markets were changing the way people thought about retirement.

“A lot of people were interested in the concept and said, ‘Wow, this is great, and it suits the needs of the marketplace,’” remembers Charbonneau of the amendments. “But once you started looking at the nitty-gritty, you said, ‘Wait, it’s not as good as it could be.’ We were all stuck with the Income Tax Act.

Indeed, the federal act contained provisions that prevented pension plan members from drawing monthly pension benefits while still working and contributing to their plan. To get around this, the Quebec legislation (and that of Alberta, which implemented similar changes in 2000) offered DB plan members who opted for phased retirement their pension payments as an annual lump sum.

Charbonneau says this stumbling block led to limited uptake of the phased retirement option, since the annual payments didn’t work for individuals living on monthly budgets.

But many in the industry cite Quebec’s initial phased retirement experiment as a catalyst for other changes that have taken place around retirement in Canada. The portion of the Income Tax Act was finally changed in 2007. And recent changes to the Canada Pension Plan and Old Age Security account for Canadians’ increasing lifespans and the need—or the desire—to work longer.

“It’s a good thing to stop the mentality that retirement is all or nothing, and to have a transition period. You don’t go from black to white in a single step; you go through gradual shades of grey.”

Charbonneau says there is still work to be done around retirement. For one, he explains, governments need to better align the different rules to make pensions portable across Canada.

“If they could afford it, everybody would choose to live a life of leisure instead of continuing to work. If you think you might only have a few years to live, you can’t wait to stop working and enjoy life. But when you realize that you’ve got a lot more life down the road, you can postpone those plans.”

Get a PDF of this article

Copyright © 2018 Transcontinental Media G.P. This article first appeared in Benefits Canada.

Benefits Canada Newsletter

For the latest industry news and opinions, sign up for our daily newsletter.

See all comments Recent Comments


Retirement is not only about your ability to afford it financially, but also mentally. The concept was first started by Otto Von Bismark in the 1880’s as a way of helping those age 70 and older not have to work. In the US, it started in 1935, but not for the same reason. Let’s face it you can not plan to retire during a depression, when you had not been allowed to save money.
So many ask “why then was it started”? I contend that it was started as a way to force older workers out of the work force. When you remove someone from their job you create an opening, which can now be filled by someone who has been unemployed. No net new jobs have been produced; so the only way to change the gross job to a net job is to not allow that person to work. Forced retirement became the norm whether you wanted to keep working or not. Financially or mentally prepared, the Government did not care!

Friday, October 26 at 4:59 pm | Reply

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required