Sep 6: BEST FROM THE BLOGOSPHERESeptember 6, 2021
State pension benefits starting later around the world
Here in Canada, the “normal” age at which you can start full government retirement benefits – the Canada Pension Plan (CPP) and Old Age Security (OAS) – is 65.
That date probably reflects the old “mandatory retirement” rules of years ago which decreed that at 65, it was time to go.
But with people now living longer and working until they’re older, an article by Schroders notes that moving beyond age 65 for official pension start dates.
For instance, the article notes, in the U.S., pensions start at 66 and will move to 67 in 2027. Australia is similar, and will move to age 67 in 2023. The Netherlands and several other European country are moving to a “67+” start date with links to life expectancy rates, Schroders tells us.
Schroders explains the shift this way.
“The model common in most developed countries – start work at 18 to 21 and retire at around 60 to 65 – no longer looks viable as governments try to balance pension obligations with stretched public finances,” the article tells us.
Another factor, the article continues, is the increase in life expectancy. There is a growing “demographic imbalance where there are fewer retired persons for every retired person,” we are told. Not only are older folks living longer, but the birth rate is declining, meaning the talent pool to replace retiring workers isn’t growing as it once was, the article states.
“Typically, the fertility rate required to replace an existing population is 2.1 children per woman,” the article notes. “According to the latest data, the average for the 35 countries in the Organisation for Economic Co-operation and Development (OECD) is 1.7. Many countries, including Germany, Japan and Spain sit at 1.5 or lower,” Schroders explains.
So the ratio of the working to the “dependant,” those not working any longer, “has fallen and will keep falling for decades,” the article adds.
Lesley-Ann Morgan, Schroders’ Head of Retirement, calls this situation “a ticking timebomb.” Retirement systems “may not be affordable in some countries unless adjustments are made,” and the easiest way to fix them is to move the retirement age forward.
The takeaway for those of us who are not retired is this – pay attention to what’s going on with the CPP and OAS, and retirement rules in general, because they can change. Most recently, the CPP expanded its benefits for future retirees – good news for younger workers – but the power of demographics may mean other changes that are yet to be enacted.
One way you can help protect yourself against future changes in state pension benefits is by having your own retirement nest egg. A great option is the Saskatchewan Pension Plan, which allows you to stash up to $6,600 a year away for retirement. That money is professionally invested, and at retirement, if you are worried you might live to 104 like your mom, SPP has annuity options that ensure you won’t run out of money no matter how many birthday candles they put on the cake. Check out SPP today.
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Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.