Posthaste: Why older Canadians are part of the problem and the fix to boost Canada’s retirement system

Canada’s retirement programs and private pension plans put the country 18th on a global pension index of 55 countries, but some of the ways to improve the system include having more older Canadians working longer, according to professional services firm Marsh.

“Canada’s retirement system is strong. There’s no doubt about it,” Hubert Tremblay, a partner and senior wealth adviser at Marsh Canada in Montreal, said.

Canada’s B rating, which translated into a score of 70.6 out of 100, was due to a solid minimum level of financial support for the poorest older Canadians, decent workplace pension coverage, mostly for the public service, strong pension assets as a percentage of gross domestic product (GDP) and a system overseen by strong regulations and governance.

Marsh calculated its scores by measuring the adequacy, sustainability and integrity of various countries’ retirement systems.

Canada scored 67.1 in adequacy, or providing “meaningful retirement incomes today,” 66.6 in sustainability and 81.7 in integrity.

Six countries, including the Netherlands, Denmark and Iceland, scored above 80 to achieve an A grade.

Canada’s retirement system includes government programs such as the Canada Pension Plan (CPP), Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the Quebec Pension Plan (QPP), as well as the so-called Maple Eight pension behemoths and hundreds of private pension plans run by employers into which they and their employees contribute.

But the lack of private-sector retirement savings arrangements between employers and employees was considered Canada’s biggest flaw.

Tremblay estimated that only 10 per cent of workplaces in the private sector have a defined-benefit pension plan, which provides a guaranteed payment once a person stops working.

“A fix for that that would allow Canada to move up on the index would be to have mandatory employer contributions to workplace pension plans,” he said, adding he doesn’t think that “will come anytime soon.”

Another fix to strengthen the outlook for retirement would be for Canadians to work longer. Tremblay said that is already happening in Canada with the participation rate — those looking for work or working — doubling between ages 60 and 65 over the past 25 years.

Increasing that number would improve the sustainability of the pension system because people are still contributing to pensions plans and collecting payments later.

More older people working doesn’t necessarily mean Canada’s pension safety net has failed, Tremblay said, just that more people are healthier, allowing them to remain in the workforce longer.

Households increasing their savings and reducing their household debt would also help secure a more stable retirement, the report said. Canada has the highest household debt of the Group of Seven countries.

Marsh also said Ottawa needs to rein in debt as a per cent of GDP to protect OAS and GIS, which are pay-as-you-go programs. Tremblay said they account for three per cent of Canada’s GDP.

There are other bigger global trends putting pressure on retirement systems in Canada and around the world, including aging populations, declining birth rates and rising life expectancy.

For example, the number of Canadian aged 65 and up has risen to 20 per cent from 18.7 per cent of the total population over the past five years, according to Statistics Canada.

The birth rate has fallen to 1.4 children per woman, much lower than the renewal rate to replace the population, which is around 2.1, Tremblay said.

CPP and QPP have already factored in a larger numbers of older Canadians drawing on the funds, but Tremblay said social programs such as OAS and GIS can be compromised if there aren’t enough people working to keep economic activity humming and revenue flowing into government coffers.

“That’s where those programs can be compromised,” he said.

Among the solutions Marsh proposes to the demographic time bomb are to improve Canada’s productivity and increase immigration.

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Canada’s economic growth is expected to slow significantly by the end of the year, as U.S. tariffs and Canadian countermeasures continue to pressure the economy, according to a new report by the Office of the Parliamentary Budget Officer.

The report, published on Tuesday, projects Canada’s real gross domestic product growth will slow to 0.9 per cent in 2026 and 1.5 per cent in 2027. The forecasts were downgrades from the 1.1 per cent and 1.6 per cent projected in its previous outlook, published in June. — Paula Tran, Financial Post

Read the full story here.

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British Columbians head to the polls on Saturday, with the B.C. Green Party promising a one-time wealth tax on the province’s richest households plus an annual tax.

Tax expert Kim Moody explains that the party is proposing the levy retroactively apply to the previous tax year, catching anyone who decides to move to avoid it. Households worth more than $50 million that move out of B.C. would pay an exit tax, which the Greens compare to the departure tax Canada charges people who emigrate.

Think of it as B.C.’s own Hotel California, writes Moody, the wealthy can try to check out, but they can never quite leave.

Find out more here.

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Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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