The fact that we are living longer will create retirement challenges that must be overcome, according to the Canadian Institute of Actuaries.
Canadians who are members of pension plans are living longer than previously predicted. For example, a woman aged 65 in 2014 was expected to live another 22.1 years. The new table indicates a life expectancy of 24.5 years. For a man aged 65, the number has increased over 2.5 years to 22.5 years, said the institute.
In the next few months, the institute will be releasing final versions of the first-ever Canadian pensioner mortality tables.
"Think about how living an unanticipated 2.5 more years might impact your retirement saving strategy — or your employer's pension plan. These changes are significant to Canadians, their employers, and their governments,” said Jacques Lafrance, president of the Canadian Institute of Actuaries.
However, Canada is not facing a crisis, said the institute. Prior to the change in the entitlement age for Old Age Security and the Guaranteed Income Supplement — from 65 to 67 — the cost of the programs was expected to increase from 2.3 per cent of Canada's gross domestic product in 2010 to a peak of 3.1 per cent in 2030.
With the change to be fully implemented in 2029, the cost is expected to peak at 2.9 per cent of gross domestic product in 2023.
However, current legislation forces individuals to start withdrawing from registered retirement vehicles not later than at age 71. Given that Canadians are living longer and investment returns have been and are currently at low levels, the government should consider raising that age to provide more flexibility, said the institute.
© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.