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Canada’s pension 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 allowing older Canadians to work longer, according to professional services firm Marsh.
“Canada’s pension system is strong. There’s no doubt about it,” said Hubert Tremblay, a partner and senior wealth adviser at Marsh Canada in Montreal.
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 public service, strong pension assets as a percentage of gross domestic product (GDP) and a system overseen by strong regulations and governance.
Marsh calculated his scores by measuring the adequacy, sustainability and integrity of the pension systems of different countries.
Canada scored 67.1 in adequacy, or providing “meaningful retirement income 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 pension 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 to which they and their employees contribute.
But the lack of private sector retirement savings arrangements between employers and employees has been seen as Canada’s biggest failing.
Tremblay said only 10 percent of private sector jobs have a defined benefit pension plan, which provides a guaranteed payout when a person stops working.
It is estimated that only about 48 per cent of private sector workplaces have some type of employer-employee pension plan in which both parties contribute, meaning more than half do not have such an arrangement, according to Benefits Canada.
“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 that he doesn’t think that “will come soon.”
Another fix to boost retirement prospects would be for Canadians to work longer. Tremblay said it’s already happening in Canada with the participation rate — those looking for work or working — doubling between the ages of 60 and 65 over the past 25 years.
Increasing that number would improve the sustainability of the pension system because people are still joining pension plans and collecting payments later.
More older people working doesn’t necessarily mean Canada’s retirement safety net has failed, Tremblay said, just that more people are healthier, allowing them to stay in work longer.
Households increasing their savings and reducing their household debt would also help secure a more stable retirement, the report says. Canada has the highest household debt of the Group of Seven countries.
Marsh also said Ottawa needs to reduce debt as a percentage of GDP to protect OAS and GIS, which are pay-as-you-go programs. Tremblay said they account for three percent of Canada’s GDP.
There are other larger global trends that are putting pressure on pension systems in Canada and around the world, including aging populations, declining birth rates and increasing life expectancy.
For example, the number of Canadians aged 65 and over has increased to 20 per cent from 18.7 per cent of the total population in the last five years, according to Statistics Canada.
The birth rate has fallen to 1.4 children per woman, much lower than the replacement rate to replace the population, which is about 2.1, Tremblay said.
CPP and QPP have already targeted a larger number of older Canadians on the funds, but Tremblay said social programs like OAS and GIS could be compromised if there aren’t enough people working to keep economic activity humming and revenue flowing into government coffers.
“That’s where these programs can be compromised,” he said.
Among the solutions Marsh proposes for 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 US tariffs and Canadian countermeasures continue to weigh on the economy, according to a new report from 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 percent in 2026 and 1.5 percent in 2027. The forecasts were downgrades from the 1.1 percent and 1.6 percent projected in his previous perspective, published in June. – Paula Tran, Financial Post
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British Columbians go to the polls on Saturday, with the BC Green Party promising a one-time wealth tax on the province’s wealthiest households plus an annual tax.
Tax expert Kim Moody explains that the party proposes that the benefit applies retroactively to the previous tax year, avoiding anyone who has decided to move. Households worth more than $50 million that move out of BC would pay an exit tax, which the Greens compare to the departure tax that Canada pays people who emigrate.
Think of it as B.C.’s own Hotel California, Moody writes, that the rich can try to check out, but they can never quite leave.
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The FP Atlantic Economic Report takes you behind the scenes of the business world in Atlantic Canada. We bring you insights from CEOs, heads of government, investors and economists about what makes the regional economy tick and where it’s headed next. Register 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 don’t want to miss. Plus, its mortgage rate page for Canada reviews the 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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