Ottawa should clarify messaging around CPP/QPP for better outcomes, urges NIA

A key retirement decision for millions of Canadians could be made in a more informed way if the federal government changed some of its messaging, according to a new report.

The National Institute on Ageing says that improvements should be made to how people find out about claiming CPP/QPP benefits, with current information containing gaps and “unintended psychological influences” that may led people to claim early.

This means that many people who can afford to hold off claiming pension benefits past traditional benchmark ages of 60 or 65 are not doing so, therefore missing out on more generous payments later in retirement.

Looking at data from 2021, the report found that six out of ten eligible claimants took pension benefits at 60 or 65 when they could have waited until they were older, up to 70 years of age. The NIA report says this decision is partly due to official messaging.

"Government communication plays a critical role in shaping the financial decisions of Canadians as they transition into retirement," said Dr Bonnie-Jeanne MacDonald, Director of Financial Security Research of the NIA. “Reframing how we present the options can empower older adults to make more informed choices that reflect their financial needs and long-term goals. It is not what is said but also how and when it is said that isimportant.”

The report calls for 6 improvements to how CPP/QPP pension information is communicated:

1. Adopt more precise terms — such as “Minimum Benefit Age” when referring to age 60 and “Maximum Benefit Age” when referring to age 70 (CPP) and 72 (QPP) — to help foster greater clarity for CPP participants. These evidenced based terms clearly communicate the role of age in benefit claiming and offer a simple yet impactful way to help participants make more informed decisions.
2. Reframe age adjustment factors to reference the amount payable at the "Maximum Benefit Age" rather than age 65. This approach emphasizes the benefit reduction due to early claiming and encourages long-term thinking.
3. Use a neutral term for age 65. Referring to age 65 as the “standard age to start your retirement pension” could be misinterpreted as a government recommendation, diverting attention from the full range of choices. More neutral terms— like “the reference age for benefit calculations”—should be used.
4. Send government communications to participants several years before age 60. Giving participants more time to contemplate the decision allows them to understand their options better and appropriately plan for their retirement in a way that suits their circumstances.
5. Provide a government-sponsored “basic” pension estimator that shows the impact of different claiming ages on a person’s CPP/QPP benefit entitlements. This online tool should directly access the individual’s entitlement data held by the CPP/QPP administrators, enable the user to input future earnings and contribution estimates, and accurately estimate future pensions at alternative ages. It should incorporate the complicated rules of CPP/QPP benefit calculations that are currently omitted. This tool would enable more accurate advice from industry experts.
6. Create a government-sponsored “beyond the basics” projection tool for CPP/QPP participants who do not have the kinds of retirement investments that warrant professional support from the financial services industry. The tool would calculate their expected spendable income from Canada’s complex system of public pensions — CPP/QPP, Old Age Security (OAS), Guaranteed Income Supplement (GIS) — net of income taxes.

“It’s important to point out that we are not proposing any changes to CPP/QPP benefit design,” explains Doug Chandler, co-author and Associate Fellow of the NIA. “Instead, the paper proposes simple yet impactful steps. More neutral, well-timed and personally relevant information is needed to help Canadians think through their options more carefully.”