Keep older Canadians working, OECD says
Pension plans also in need of reform to avoid future financial burden
Canada should encourage people to work beyond retirement age in order to prevent a slowdown in economic growth, according to a report released today by the Organization for Economic Cooperation and Development ( OECD).
More than just a plea to help older workers keep their jobs, the report’s goal is to provide solutions to a growing problem among OECD member countries: Thanks to ageing populations, the proportion of retirees to workers is growing unsustainable from an economic perspective.
In Canada, the ratio of retirees to workers is expected to balloon to about 45% in 2050, up from 20% last year.
In other words, working Canadians will be forced to support a large number of retirees in the near future, creating a tremendous financial burden.
“Consequently, there is a risk that a combination of slower labour force growth and a sharp rise in the number of workers exiting the workforce [as the Baby Boom generation retires] could affect economic growth over the next few decades,” the OECD said in its report, one in a series of 21 country reports.
To minimize the risk of slower growth, the OECD recommends removing most of the barriers that older people currently face in the workforce — beginning with an end to mandatory retirement.
While there is no mandatory retirement age in Canada, rules vary by province. Ontario and New Brunswick recently announced they were planning to end mandatory retirement laws. However, such laws still exist in British Columbia, Saskatchewan, Nova Scotia and Newfoundland and Labrador.
As well, the OECD believes Canada should scrap the stop- work clause in the Canada Pension Plan so workers can draw a pension without having to leave the workforce. Current rules require workers aged 60 to 64 to stop working one month prior to receiving their first pension payment.
Canada should also review the rules governing its tax system and private pension systems, which provide strong financial incentives for Canadians to retire early. The OECD believes that, at a minimum, the federal government should relax rules so Canadians can both receive and accrue benefits from defined benefit registered pension plans, which is not allowed under existing rules.
The federal government should also set up additional programs to help older people find success with self-employment. “Self-employment can play a part in terms of promoting a more gradual transition to retirement,” the OECD said.
The organization of 30 nations noted Canada is already ahead of many of its OECD peers in some ways. For example, the Canada Pension Plan is more sustainable today, thanks to reforms in 1998 that reduced the financial burden of the pension system on public expenditures.
The federal government also recently launched a series of initiatives — including the Older Workers Pilot Projects Initiative — designed to help older workers get jobs and hold on to the jobs they already have.
As a result of these initiatives, the participation rate of men and women between the ages of 50 and 64 has grown over the past 10 years but must continue to expand, the OECD said. “Labour force participation rates of older people are still below the levels in several other major OECD countries, including the United States and the United Kingdom.”
Financial Post
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