China is the latest in a slew of countries planning to gradually raise the statutory retirement age as an aging world population is forcing governments to reform their pension plans.
Delaying retirement also “makes sense” and could have “a lot of benefits” in other countries, including Canada as the country grapples with labour shortages and a record low fertility rate, experts say. But could it happen?
There is no mandated 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 as early as age 60 or as late as age 70. This is a monthly, taxable benefit that replaces part of the person’s income when they retire and those who qualify for it receive it for the rest of their life.
Another type of public pension is the Old Age Security (OAS), which is a monthly payment if you are 65 and older.
However, with Canada’s population aging “very rapidly” due to a record 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 kids and if our population is changing rapidly, we have to accommodate that population aging and this would be one way in doing so,” Kerr told Global News in an interview.
Politically, however, it might be a “very hard sell,” he added.
The previous Conservative government under then-prime minister Stephen Harper had raised the age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) from 65 to 67.
That policy change set for implementation starting in April 2023 was later scrapped by the Liberals after Prime Minister Justin Trudeau came into power in 2015.
The federal government at this time is not considering increasing the eligibility age of public pensions.
The office of Minister of Labour and Seniors Steve MacKinnon told Global News that the retirement age “was brought back down to 65, where it belongs.”
“Seniors have worked hard their whole lives. They deserve to age with dignity,” MacKinnon’s office said in an emailed statement.
Why is China raising its retirement age?
China’s statutory retirement age is already one of the world’s lowest — at 60 for men, 55 for white-collar working women and 50 for women who work in factories.
On July 22, officials outlined plans in a policy document to allow workers for the first time to be able to choose to continue working beyond the retirement age. The reforms outlined in the document are envisaged to be completed by 2029, they added.
This comes as the life expectancy has risen in China to 78 years, outstripping the United States, and is projected to exceed 80 years by 2050.
The country has also seen a declining birth rate and an aging population that fell for a second straight year in 2023.
Economists say China’s current pension system, which relies on a shrinking active workforce to pay the pensions of a growing number of retirees, is unsustainable and needs to be reformed.
Eleven of China’s 31 provincial-level jurisdictions are running pension budget deficits, finance ministry data show. The state-run Chinese Academy of Sciences sees the pension system running out of money by 2035.
Should Canada weigh similar delays?
Canada’s proportion of people aged 65 and older is expected to almost double over the next four decades and its 85-and-older population could triple by 2073, according to Statistics Canada projections from June.
Bonnie-Jeanne MacDonald, the director of financial security at Toronto Metropolitan University’s National Institute on Aging, said Canada’s baby boomer population, which is expected to have the longest life expectancy in history, is slowly moving into retirement and that will put a lot of pressure on the economy, long-term care and health-care system.
“We really are kind of facing a perfect storm,” she said in an interview with Global News.
That is why Canada, like other countries, needs to get ahead of that problem, MacDonald said.
Kerr said while Canada may not be facing “the same sort of demographic crisis” as other countries, its aging population comes with challenges, such as climbing costs for health care and public pensions.
The cost of living is already forcing many Canadians to delay or reconsider their retirement plans.
StatCan data shows that the average age at which Canadians retire has gone up over the last decade, reaching 65.1 in 2023.
MacDonald said compared to other countries Canada has a “more flexible model” when it comes to retirement, but it is facing the same type of aging challenges.
While MacDonald said she is not in favour of mandating a retirement age as it can “be very personalized”, she said there are social, economic, financial and health benefits in delaying retirement.
“I think what we can do a lot better in Canada is to just help support an aging population, and also let them know that the advantages of delaying their retirement can be quite substantial,” she said.
For instance, every year that a person delays their retirement benefits, those payments go up and the more years a person remains in the workforce that helps them save more for their retirement.
“A lot of people get a little confused about when they’re supposed to retire, and they do think they need to retire at age 60 or 65 and, I think in the long term, that’s going to hurt Canada as well as those people who are retiring earlier than they may otherwise be doing,” MacDonald said.
Kerr said that the average 65-year-old in 2024 is in “much better health” compared to 20 or 30 years ago, so they are expected to live much longer in retirement.
“What we’re seeing is a growing share of 65-year-olds going into retirement in good health,” he said.
“It doesn’t really make sense for them to be retiring when they’re sort of at the peak of their careers, still in good health. It can make a major economic contribution there.”
Delaying retirement could also help overcome the country’s labour shortages, he said.
— with files from Reuters.