"The careers are getting shorter, and the retirements are getting longer," Laurier Guimond, senior program officer, Human Resources and Skills Development Canada, told the CIFPS annual national conference in Niagara Falls, Ont., earlier this week. "So things are getting out of sync."

Particularly off-kilter, given the lengthening of life expectancies since the CPP legislation was first drafted, are existing structures that provide little incentive for people to continue working beyond age 65.

Guimond notes proposed changes to the factors used to determine CPP payments will adjust for that discrepancy to the point where workers waiting until age 70 to retire would result in a 42% increase in benefits, compared with a 31% reduction for those choosing to retire at age 60. If everything stays on schedule, the planned changes would kick in by 2012.

"We're rewarding additional years of work and returning neutrality to the plan," said Guimond. The changes would also eliminate the current work-cessation test, which requires retirees to show they have no income - or at least earn less than the monthly benefit.

Working longer will also help those who left the workforce to raise children or, due to extended layoffs, to accumulate more benefits - a point that’s sure to resonate with clients in this economic climate.

The presentation also included case studies to illustrate how hypothetical retirees would fare based on the age at which they chose to retire and other life factors. Slides from Guimond's presentation with those illustrations can be viewed here.

Guimond stressed that existing retirees won't be affected by the reforms.


Theresa Wever and the Money Concepts Team.

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