fpinfomart.ca

C.D. Howe calls for
longer working life: Think-tank warns of 'major economic
challenge'
National Post
Fri 28 May 2004

Page: FP3
Section: Financial Post: News
Byline: Ian Jack

Source: Financial Post

OTTAWA - The C.D. Howe Institute yesterday joined a small but influential
group of policy experts calling for governments to make it easier to work past
the normal retirement age.

There is no law on mandatory retirement in Canada, but many company pension
plans include early retirement incentives, and full Canada Pension Plan
payouts start at age 65, in effect discouraging people from staying in the
workforce any longer.

Yvan Guillemette, a policy analyst at the economic
think-tank, says governments need to find a way to keep older people in the
workforce longer or face "a major economic challenge."

The ratio of workers to retirees is expected to fall dramatically over the
next 30 years as the Baby Boom generation retires. The bad demographic news is
exacerbated by the trend toward early retirement, Mr. Guillemette says in the
C.D. Howe paper.

The think-tank is the latest to float the idea of workers sticking around
past traditional retirement ages. Paul Martin, the Prime Minister, David
Dodge, governor of the Bank of Canada, and Peter Nicholson, Mr. Martin's
closest advisor on economic issues, are among the others.

"The work disincentives inherent in the Canadian income security system
have a significant impact on retirement," Mr. Guillemette warns.

The C.D.
Howe study points to one thing the federal
government can do itself -- adopt proposed changes to the Quebec Pension Plan
that would remove "substantial" disincentives to work past 60.

"Rising labour market inactivity among increasingly skilled older men
represents an enormous loss of economic potential," the study says.

The QPP proposals include allowing individuals to start collecting their
pension at 60 even if they continue to work. As well, they would remove
disincentives that mean continuing to work at a less demanding and
lower-paying job may actually reduce the pension payout, since those lower
wages are included in the calculation of pension benefits.

The QPP proposals would also see any additional contributions from earnings
after retirement flow to higher benefits. Currently, if an individual retires
and then comes back to work, their QPP payout does not suffer but there is no
guarantee the additional contributions will lead to increased benefits either.

The proposals could reduce the monthly QPP pension received by a worker who
retires early by up to 6%, but could result in a boost of 15% to 30% in
pension benefits if retirement were deferred to age 70, Mr. Guillemette found.

The study cautions that public retirement plans are only one factor in the
movement toward earlier retirement and it may be that changes "would only have
a very limited impact on actual retirement decisions."

Nonetheless, the QPP proposals represent "a significant step in the right
direction" and should be implemented by the CPP, Mr. Guillemette says.

Edition: National
Story Type: Business
Note:
[email-masked].
Length: 456 words