China Considers Raising Retirement Age. Could Canada Follow Suit? – National
China is the latest in a series of countries planning to gradually raise the legal rate retirement age as the world’s aging population forces governments to reform their pension systems.
Delaying retirement also “makes sense” and could have “many benefits” in other countries, including Canada, as the country grapples with labour shortages and a Record fertility rateexperts say. But could it happen?
There is no mandatory retirement age in Canada, but the standard age to start 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 are entitled to it receive it for the rest of their lives.
Another type of public pension is the Old Age Security (OAS)which is a monthly payment if you are 65 or older.
However, with Canada’s population aging “very rapidly” due to historically low birth rates, 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 the aging population and this would be one way to do that,” Kerr told Global News in an interview.
Politically, however, it could be “a very difficult sell,” he added.
The previous Conservative government, led by then Prime Minister Stephen Harper had raised the age of eligibility for Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) from 65 to 67 years old.
The policy change, which was to be implemented starting in April 2023, was later abandoned by the Liberals after Prime Minister Justin Trudeau came to power in 2015.
Currently, the federal government is not considering increasing the age of eligibility for public pensions.
The office of Minister of Labour and Seniors Steve MacKinnon told Global News that the retirement age “has been brought back to 65, where it should be.”
“Seniors have worked hard their entire lives. They deserve to age with dignity,” MacKinnon’s office said in an emailed statement.
Why is China raising the 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, authorities outlined in a policy paper plans to allow workers to choose to continue working beyond retirement age for the first time. The reforms outlined in the paper are expected to be completed by 2029, they added.
The development comes as life expectancy in China has risen to 78 years, surpassing that of the United States, and is expected to exceed 80 years by 2050.
The country has also experienced a declining birth rate and an aging population. which fell for a second consecutive year in 2023.
Economists say China’s current pension system, which relies on a shrinking workforce to pay pensions for a growing number of retirees, is unsustainable and needs to be reformed.
According to data from the Ministry of Finance, 11 of China’s 31 provinces are running a pension budget deficit. The Chinese Academy of Sciences, a state-run body, estimates that the pension system will run out of money by 2035.
Should Canada consider similar delays?
The proportion of people aged 65 and over in Canada is expected to almost double over the next four decades. The population of over 85s 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 Toronto University, said Canada’s baby boom generation, expected to have the longest life expectancy in history, is slowly moving toward retirement, putting a lot of pressure on the economy, long-term care and the health-care system.
“We’re really facing a kind of perfect storm,” she said in an interview with Global News.
This is why Canada, like other countries, must take the lead on this problem, said Mr. MacDonald.
Kerr said while Canada may not be facing “the same type of demographic crisis” as other countries, its aging population comes with challenges, such as rising health care and public pension costs.
The cost of living already forces many Canadians to delay or reconsider their retirement plans.
StatCan data shows that the average age at which Canadians retire has increased over the past decade, reaching 65.1 years in 2023.
MacDonald said that compared to other countries, Canada has a “more flexible model” when it comes to retirement, but it faces the same types of challenges related to aging.
While MacDonald said she does not support imposing a mandatory retirement age because it can be “very individualized,” she said there are social, economic, financial and health benefits to delaying retirement.
““I think the best thing we can do in Canada is just help support an aging population and let them know that the benefits of delaying their retirement can be quite substantial,” she said.
For example, every year a person delays taking their retirement benefits, those benefits increase, and the longer a person stays in the workforce, the more they can save for retirement.
““A lot of people are a little confused about when they’re supposed to retire, and they think they have to retire at 60 or 65, and I think in the long run that’s going to hurt Canada and hurt people who are retiring earlier than they otherwise would,” MacDonald said.
Kerr said the average 65-year-old in 2024 is in “much better health” than they were 20 or 30 years ago, and so should live much longer in retirement.
“We’re seeing an increasing share of 65-year-olds retiring in good health,” he said.
“It doesn’t really make sense for them to retire when they’re at the peak of their careers and still healthy. That can be a major economic contribution to this country.”
Delaying retirement could also help overcome labor shortages in the country, he said.
— with files from Reuters.
