How raising the retirement age would benefit Canadians

Updated 10- 12-2023

The issue over when Canadians should start receiving retirement benefits is still up for debate. Both the previous and current federal governments have taken contrasting stands on the matter, even as the pension sector continues to face changing demographics and increasing life expectancies.

Wealth Professional looks at both sides of the issue in this article. We will go over the arguments for and against raising the retirement age from industry experts. We will also examine what benefits are available for seniors leaving the workforce. If you’re among those asking, “Should we raise the retirement age?” then this piece can help you gain a deeper understanding of the subject.

How would raising the retirement age benefit Canadians?

Amid studies and reports indicating that traditional retirement is becoming harder to achieve, the Canadian Institute of Actuaries (CIA) has weighed in with a modest proposition: let people retire later.

In its 2019 report, the CIA pointed out that one of the main reasons for this was the rising longevity of Canadians at age 65. Data that the group gathered has shown that over the 50-year period ending in 2016, the average life expectancy rose from 13.6 years to 19.9 years for men, and from 16.9 years to 22.5 for women.

(Since then, however, life spans have become longer. The latest Actuarial Report on the Canada Pension Plan (CPP) reveals that figures have increased to 21.3 years for men and 23.8 years for women.)

“With Canada’s population living longer, along with the anticipated shortage of Canadian workers in the coming decades and the erosion of private sector pensions, the CIA believes that it is time for federal, provincial, and territorial governments to refresh their approach to helping Canadians achieve retirement income security,” the group noted.

The CIA called for policies that support a target retirement age of 67 instead of 65, pointing to additional headwinds from low interest rates and mounting costs of retirement. It also recommended early retirement at 62 as opposed to 60 years old, as well as a maximum deferred retirement age of 75 rather than 70 or 71.

In a separate interview, Carly Wybrow, CIA spokesperson, argued that private sector employers have veered away from defined benefit pension plans and replaced these with defined contribution plans or, sometimes, no pension at all.

“Faced with these changing demographics and financial pressures, many Canadians are already choosing to work beyond age 65,” she explained. “Yet, the target eligibility age for CPP/QPP and old-age security benefits remains at 65. It’s time to update Canada’s retirement age from 65 to 67 to reflect the reality of how long Canadians are choosing to work, as well as their needs in retirement.”

Going back to the CIA’s study, the group noted that the new age cut-offs would have increased the utility of CPP/QPP and Old Age Security (OAS) benefits. It argued that compared to the current retirement age of 65, retiring at 67 would allow Canadians to receive 16.8% more CPP/QPP benefits upon leaving the workforce. They would also receive 14.4% more OAS benefits.

Pushing the maximum postponed retirement age to 75, meanwhile, would increase the current 25% CPP/QPP benefit to 29%. And under the CPP/QPP expansion to be phased in over 40 years, the new 33.3% benefit would climb to 39%.

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How would raising the retirement age impact RRSPs?

With respect to registered pension plans and RRSPs, the CIA pointed out that offering later retirement options would provide more flexibility for Canadians to manage their retirement savings. In the end, letting people choose to take their retirement benefits later would let them receive higher lifetime retirement income.

“Canadians are increasingly choosing to work to later ages, and it is reasonable to expect a significant portion of workers to work into their 70s,” the group noted.

The CIA also acknowledged the possible impact of government tax revenues that would result from postponing the receipt of income from tax-assisted registered pension plans and RRSPs.

The group noted that the total amount may increase or decrease over time based on investment returns on the deferred income and possible changes in tax rates over the years of deferral. It added, however, that the impact would not be a loss of income but rather a delay in the timing of the tax income.

“Changes could be phased-in over time, for example, by increasing the target retirement age by three months each year from 2021 to 2029,” the CIA suggested.

Is raising the retirement age in Canada necessary?

Some experts argue that while Canadians are indeed living longer, this doesn’t mean that raising the retirement age is a necessary step for the government to take. 

Citing 2022 census data, Laura Brownell, senior research officer at the Canadian Union of Public Employees (CUPE), noted how more Canadians were already working at a later age.

“Some work past age 65 because they need to, but most do so because they want to,” she explained in an interview countering Wybrow’s points. “Incentives for working past age 65 are already built into the CPP/QPP and OAS.”

Brownell added how raising the retirement age could “harm those who are most vulnerable.”

“OAS is a flat-rate universal program, making it especially valuable to lower income and disabled Canadians,” she argued. “Workers in jobs requiring physical labour often need to stop working at age 65. Socio-economic status is a proven and significant factor in longevity, so higher-net-worth individuals will receive a disproportionate benefit from these government retirement programs. Lower income workers will be further disadvantaged if their benefits start at a later age.”

A better option, Brownell suggested, was to continue the expansion of the CPP and increase the OAS benefit. “[These would be] better for individual Canadians, better for the economy, better for our society,” she added.

James Orlando, director of TD Economics, meanwhile, admitted that the country’s aging demographic has become a challenge for businesses. The impact, however, has been softened by immigration and the number of Canadians choosing to work at “increasingly advanced ages.”

“The fact that we have so many people coming in, we've done such a good job of attracting immigration, [that] has enabled us to be able to afford the supports to the older population of Canada,” Orlando said in an interview with BNN Bloomberg.

He added that there has been a significant rise in Canadians aged between 60 and 70 years old electing to work longer partly because of changing incentives.

“The fact that we've done things like eliminating the mandatory retirement age in certain provinces, the fact that we have a system in place where we've incentivized people to delay receiving things like Canadian Pension Plan benefits or even delaying Old Age Security benefits, that incentivizes people to not draw on [those benefits] but also work longer,” he said.

Had the federal government not made these changes, Orlando noted that it would have to allocate more money to support Canadians that would have retired at an earlier age.

What government retirement benefits are Canadians entitled to?

The federal government offers three types of benefits that you may be able to access when you decide to retire. These are:

1. Canada Pension Plan (CPP) and Québec Pension Plan (QPP)

The CPP/QPP provides you with a taxable monthly benefit designed to replace your income when you retire. You can access this benefit once you reach 60 years old if you have made at least one valid contribution to your plan.

Contributions are automatically taken from your paycheck during your working years. But they can also come from credits from a former spouse or common-law partner at the end of your relationship.

To access your CPP/QPP benefits, you must apply in advance. The amount you will receive depends on the following factors:

• The age you choose to receive your pension
• How long and how much you have contributed to the plan
• Your average earnings during your working years

For 2023, the average monthly CPP/QPP payout for a newly retired 65-year-old is $772.71. The maximum amount a retiree can receive is $1,306.57 per month.

2. Old Age Security (OAS) pension

The OAS is a government-funded monthly pension that you can receive when you turn 65 years old. Unlike the CPP/QPP, you don’t have to make contributions to qualify for OAS benefits. You just need to be a Canadian citizen or a legal resident for at least 10 years.

Your monthly payouts depend on how long you have been living in Canada. This means that you can access OAS benefits even if you’ve never worked or you’re still working past 65 years old. Like CPP/QPP benefits, OAS pensions are taxable.

Service Canada automatically enrolls citizens and legal residents to the OAS program and informs them of their enrollment. However, you may need to apply for the benefits if the government doesn’t have enough information to enroll you.

The table below shows the maximum payments and income thresholds for the current year from Services Canada.

3. Guaranteed Income Supplement (GIS)

The GIS is a monthly payment designed for low-income Canadians aged 65 and older. It is a non-taxable benefit that comes on top of the OAS.

If you were automatically enrolled for OAS, you’ll also be automatically enrolled in the GIS program if you meet the eligibility requirements. The amount you’ll receive depends on your income, OAS pension payouts, and whether your spouse or common-law partner is also receiving OAS benefits.

You can check out how much GIS benefits you’re entitled to on this page.

What is the average retirement age in Canada?

Canadians retire at an average age of 64.6, according to the latest figures from Statistics Canada (StatCan). The number has been steadily increasing by a fraction in the past several years.

Public sector employees are leaving the workforce earlier, with the average retirement age of 62.7. Private sector workers exit the labour force at around 64.7 years old while self-employed Canadians retire at an average age of 68.4.

At what age do Canadians start receiving government pension benefits?

You can start receiving government pension benefits when you reach the age of 65, but this is not set in stone. While 65 is the minimum age that you’re eligible for CPP and OAS benefits, you can postpone receiving payouts until you reach a certain age or access the benefits early.

CPP allows you to draw its pension benefits between the ages of 60 and 70 years old. However, accessing your pension earlier has a corresponding impact of how much benefits you receive. Your CCP pension loses 7.2% of its value for every year that you draw from it before you reach 65. This means that if you start collecting pensions at 60, you receive 36% less than if you wait until you’re 65.

Conversely, if you choose to access your CCP pensions later, the value increases 8.4% in every year the payouts are deferred. Waiting until you reach 70 before drawing your pension raises the benefits you receive by around 42%.

For your OAS benefits, you can postpone receiving payouts until you’re 70, but you cannot access your pension early. If you elect to get the benefits later, the value increases by 7.2% in every year the payments are deferred. By the age of 70, you can receive 36% more in OAS benefits than you would at 65.

What is the best age to retire in Canada?

The answer to this question depends on your lifestyle and financial situation. Proponents of raising the retirement age do have valid points, but those who claim that changing the age of retirement is unnecessary also have strong arguments. 

While most Canadians are eligible for retirement benefits once they reach the age of 60, many are already working past the average retirement age and deferring pension payouts to maximize these benefits.

If you want more helpful information about retirement benefits, you can check out our Retirement Solutions News section. Be sure to visit and bookmark this page for breaking news and the latest developments within the sector.

Do you think raising the retirement age is necessary? Feel free to share your thoughts in the comments section below.