China is the latest in a series of countries planning to gradually raise the legal retirement age as an ageing global population forces governments to reform their pension plans.
According to experts, delaying retirement also “makes sense” and could have “many benefits” in other countries, including Canada, which is facing a labor shortage and a historically low fertility rate. But could it happen?
There is no mandatory retirement age in Canada, but the standard age to begin receiving public pensions is 65. according to the federal government.
Canadian seniors can also start receiving the Canada Pension Plan (CPP) retirement pension from age 60 or up to age 70. This is a taxable monthly benefit that replaces part of a person’s income when they retire and those who qualify for it receive it for the rest of their lives.
Another type of public pension is the Old Age Insurance (OAS)which is a monthly payment if you are 65 years of age or older.
But because Canada’s population is aging “very rapidly” due to a historically low birth rate, it “makes sense” from a demographic and economic perspective to raise the retirement age, said Don Kerr, a demographer at King’s University College at Western University in London, Ont.
“As a society, we have to recognize that if we don’t want to have children and if our population is changing rapidly, we have to adapt to that aging population and this would be one way to do that,” Kerr told Global News in an interview.
However, politically it could be a “very difficult sell” idea, he added.
The previous Conservative government, led by then-Prime Minister Stephen Harper had increased the age of eligibility for Old Age Security (OEV) and the Guaranteed Income Supplement (GIS) from 65 to 67 years.
That policy change, set to take effect from April 2023, was later scrapped by the Liberals after Prime Minister Justin Trudeau came to power in 2015.
The federal government is not currently considering raising the eligibility age for public pensions.
The office of Minister for Work and Seniors Steve MacKinnon told Global News that the retirement age “has been reduced to 65, where appropriate.”
“Seniors have worked hard all their lives. They deserve to age with dignity,” MacKinnon’s office said in an emailed statement.
Why is China raising its retirement age?
China’s legal retirement age is already one of the lowest in the world: 60 for men, 55 for women working in offices and 50 for women working in factories.
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On July 22, officials outlined in a policy document plans to allow workers to choose to continue working beyond retirement age for the first time. The reforms outlined in the document are expected to be completed by 2029, they added.
This comes as life expectancy in China has risen to 78 years, surpassing the United States, and is projected to exceed 80 years by 2050.
The country has also experienced a declining birth rate and an aging population that fell for the second consecutive year in 2023.
Economists say China’s current pension system, which relies on a shrinking active workforce to pay pensions for a growing number of retirees, is unsustainable and needs reform.
According to data from the Ministry of Finance, 11 of China’s 31 provincial jurisdictions have budget deficits for pensions. The state-run Chinese Academy of Sciences predicts that the pension system will run out of money by 2035.
Should Canada consider similar delays?
The proportion of people aged 65 and older in Canada is expected to nearly double over the next four decades and its population aged 85 and older could triple by 2073. according to Statistics Canada projections for June.
Bonnie-Jeanne MacDonald, director of financial security at the National Institute on Aging at Metropolitan University of Toronto, said Canada’s baby boomer population, which is expected to have the longest life expectancy in history, is moving slowly toward retirement and that will put a lot of pressure on the economy, long-term care and health-care system.
“We are really in a kind of perfect storm,” he said in an interview with Global News.
That’s why Canada, like other countries, needs to get ahead of that problem, MacDonald said.
Kerr said that while Canada may not be facing “the same kind of demographic crisis” as other countries, its aging population brings with it challenges, such as rising health care and public pension costs.
The cost of living is already forcing many Canadians to delay or reconsider their retirement plans.
StatCan data shows that the average retirement age for Canadians has increased over the past decade and will reach 65.1 years in 2023.
MacDonald said that compared to other countries, Canada has a “more flexible model” for retirement, but faces the same kind of aging challenges.
While MacDonald said he is not in favor of mandating a retirement age because it can “be very personalized,” he said delaying retirement has social, economic, financial and health benefits.
““I think what we can do much better in Canada is simply help support an aging population and also let them know that the benefits of delaying their retirement can be quite substantial,” he said.
For example, each year a person delays their retirement benefits, those payments increase, and the more years a person stays in the workforce, the more that helps them save for retirement.
““A lot of people are a little bit confused about when they’re supposed to retire, and they think they should retire at 60 or 65, and I think in the long run that’s going to hurt Canada as well as those people who are retiring earlier than they might otherwise,” MacDonald said.
Kerr said the average 65-year-old in 2024 is in “much better health” compared to 20 or 30 years ago, so is expected to live much longer in retirement.
“What we are seeing is an increasing percentage of 65-year-olds retiring in good health,” he said.
“It makes little sense for them to retire when they are at the peak of their careers and still in good health. In that case, it can make a significant economic contribution.”
Delaying retirement could also help overcome the country’s labor shortage, he said.
— with files from Reuters.
