Canada Retirement Planning: Majority Plan To Work To 66 And Beyond, Sun Life Poll Finds
TORONTO -- As Canadians live longer and face tougher financial choices in their golden years, fewer than a third of respondents in a new survey plan to be fully retired by 66.
Sun Life Financial's annual Unretirement Index poll, released early Wednesday, found that only about three in 10 Canadians surveyed said they plan full retirement at that age.
Nearly five in 10 _ about 48 per cent _ said they plan to work part-time or freelance while they ease into retirement.
The poll results from Canada's third-biggest insurance company reflect what other public opinion surveys have shown for a while _ that Freedom 55 is a thing of the past.
"Canadian retirement expectations are changing with many planning to work longer and almost half of Canadians looking to phase in their retirement,'' said Kevin Dougherty, president of Sun Life Financial Canada.
"These results are not surprising given the current economic volatility, increasing consumer debt loads, rising healthcare costs, longer life expectancy and lack of planning. We're also finding that some Canadians believe they'll have to work longer to be able to pay for basic living expenses.''
Around the world, a retirement crisis looms as debt-strapped countries scale back benefits, raise the retirement age or make other moves to deal with rising obligations and weak economies.
In Canada, the federal government wants to scale back the long-term costs of Canada's Old Age Security program, and has met harsh criticism from critics and the opposition over suggestions Ottawa may raise the OAS retirement age to save money.
On Tuesday, Human Resources Minister Diane Diane Finley told a Canadian Club meeting in Toronto that younger Canadians would face higher taxes, fewer social programs or larger deficits unless major reforms are started right now.
Meanwhile, a recent report to the Ontario government recommended cuts to pensions for teachers, nurses and other public sector workers because they are unaffordable in a slowing provincial economy.
In the Sun Life poll, about 61 per cent of those who said they expect to work past the traditional retirement age of 65 said they would do so because they have to, while 39 per cent said it's because they want to.
The retirement issue is coming to the fore as the workforce ages and baby boomers are set to retire in the coming years, leaving fewer employees to pay into benefit plans and more drawing from them.
Canadians are also living longer -- with average life expectancy now at 85, according to Statistics Canada. Retirees will need to factor that in to savings plans.
Research from Statistics Canada released in the fall found that a 50-year-old worker in 2008 could expect to stay in the labour force another 16 years -- 3.5 years longer than would have been the case in the mid-1990s.
Meanwhile, nearly half of respondents -- 43 per cent -- said they plan to start phasing into retirement between the ages of 60 and 65, while 21 per cent said they plan to start earlier -- between ages 50 and 59 and eight per cent plan to start between 66 and 70.
"Interest in phased retirement has been growing over the past few years,'' said Ian Markham, a retirement analyst at the Towers Watson consulting company.
"Baby boomers are looking at it as a way to prolong their careers, pay off some debts and make a smooth transition into retirement. Having additional income during this transition creates an additional financial safety net for Canadians - which we're seeing as increasingly important in today's economy.''
Nearly half of respondents to the Sun Life survey said they are worried about having debt in retirement. More than twice as many respondents, 44 per cent, said that that paying down debt was the number one priority, compared to 20 per cent who said they prioritized retirement.
Sun Life's index was compiled by Ipsos Reid, which surveyed 3,701 working Canadians from age 30 to 65 between Nov. 29 and Dec. 12.
It has a 1.6 percentage point margin of error, 19 times out of 20.
Such surveys are routinely done by banks, insurers or other financial companies to research their customers's views and promote financial products and services such as mutual funds and wealth management and financial planning advice.
Old Age Security Facts
Here are some facts about Old Age Security. <em>With files from The Canadian Press</em> (Alamy)
Who Gets It?
98 per cent of Canadians aged 65 or older, regardless of whether they are retired, and regardless of their pre-retirement income.
Maximum monthly benefits are $540.12, and average benefits are slightly more than $500. (CP)
OAS is considered taxable income. It is also clawed back for people earning more than $69,562 a year. Anyone making more than $112,772 has to pay it all back. (Getty)
For people aged 65 to 69, OAS makes up 13 per cent of their income, on average. (Alamy)
About a third of OAS recipients also get the Guaranteed Income Supplement top-up, targeted at low-income seniors. GIS is income tested. (Thinkstock)
The maximum benefit for someone collecting OAS and GIS is $1,240 per month. (Jupiter Images)
5 Signs Canada's Workers Are In For A Rough 2012
Photo: CP/Andrew Vaughan
Good Jobs Few And Far Between
When it comes to evaluating Canadian job growth, the employment numbers are just part of what worries Benjamin Tal, deputy chief economist at CIBC World Markets. "It's not only the quantity, but also the quality of employment that's falling in Canada," says Tal. "A lot of the jobs that are being created are low-quality, especially part-time jobs and low-paying jobs." Though -- unlike the U.S. -- Canada has regained all the jobs lost in the recession, he says that an absence of good-paying jobs is the "main reason" why wages have stagnated. Adjusted for inflation, personal after-tax income is now rising at the slowest rate since 1995. Meanwhile, the skills mismatch in many jurisdictions has left employers short on skilled labour despite still-high unemployment levels in other regions. "If you lose a job, you don't have the skill set to go an find a job elsewhere that companies want and need," says Tal. (Alamy photo)
When Caterpillar decided to stop assembling locomotives in its Electro-Motive facility in London, Ont., it was a poignant reminder of how globalization is giving deep-pocketed, transnational corporations the ultimate trump card in bargaining with workers: a cheaper alternative. According to Mike Moffatt, a labour expert at the University of Western Ontario's Ivey School of Business, because of automation and an increase in imports from lower wage jurisdictions like China and Mexico, Canadian workers are competing for fewer manufacturing jobs. "That's given firms real power to negotiate down wages," says Moffatt, who points to the <a href="http://www.reuters.com/article/2012/02/06/riotintoalcan-alma-idUSL2E8D699U20120206" target="_hplink">Rio Tinto lockout in Quebec</a> as another illustration of the might afforded to companies with global reach. Since locking out workers at its aluminum smelter in Saguenay-Lac-Saint-Jean on December 31, the Anglo-Australian mining giant has used non-union workers to operate the facility at one-third capacity. With no plans to return to the bargaining table, the company recently announced it is restarting two suspended lines, and is expecting to return to full capacity in May. As Tal maintains, "In this environment, the bargaining power of labour is diminishing."
Just as the power has shifted toward private-sector employers, Michael Lynk, a labour law expert at the University of Western Ontario, says there is a sense that governments are becoming emboldened amid the post-recession climate of austerity that has swept from Toronto's City Hall to Parliament Hill. "There's increasingly an attitude of take-it-or-or leave-it by [private sector] employers, but we may begin to see that with public sector bargaining as well, where they basically say, 'You have to meet our bargaining objectives this round, and we're going to be prepared to endure a short or lengthy lockout to prove our point," he says. Though global economic instability recently prompted federal Finance Minister Jim Flaherty to pull back on his earlier commitment to deep cost-cutting in the upcoming budget, government departments are expecting spending to be slashed by between five and 10 per cent, a goal that will be met at least in part at the expense of public service jobs and benefits. The Canadian Centre for Policy Alternatives recently estimated that the <a href="http://www.behindthenumbers.ca/2012/02/02/federal-cuts-could-push-unemployment-to-8/" target="_hplink">federal government's budget cuts could push unemployment up half a percentage point, to 8 per cent</a>. (CP photo)
From <a href="http://dalgazette.com/featured/faculty-strike-rumours-explained/" target="_hplink">Dalhousie University</a> to <a href="http://www.thestar.com/article/1120516--labour-strife-ahead-in-air-canada-pilot-talks" target="_hplink">Air Canada</a>, employers no longer able -- or willing -- to fund costly pension plans are mounting attempts to roll back retirement benefits, stoking labour unrest and a growing sense of financial insecurity among workers. As Dalhouse University labour economist Lars Osberg explains, the financial crisis took a huge bite out of the value of corporate pension portfolios and the interest rate required to generate the stream of returns to make these programs sustainable. All of which explains why experts anticipate a deepening of the trend away from inflation-protected, gold-plated defined-benefit pension plans, shifting responsibility for retirement savings from employers to workers.
Decline Of Unions
The power in numbers that enabled Big Labour to negotiate better wages and benefits in the aftermath of the Second World War is a distant memory today, as the <a href="http://www.huffingtonpost.ca/2011/12/12/canada-income-inequality-decline-unions-middle-class-jobs_n_1139136.html" target="_hplink">erosion of unions continues to whittle away the strength of collective bargaining</a>. This is particularly true in the private sector, where unionization sits at 16 per cent of employees, less than a quarter of public sector unionization. "I think you will see more disputes with unions having to compromise more than in the past," says Tal. "I really don't see that they have the upper hand at this point." Given the yawning gap between private and public sector unionization, Lynk warns that pressure on public sector unions could mount as it has in the U.S. in recent months. "The argument they've been floating is, 'Why should public sector workers have jobs for life, good pensions, and decent wages? They're eating up your taxes,'" he says. "I wouldn't be surprised if we're not [starting] to see the beginnings of that kind of argument here in Canada."