Longer life expectancy poses threat to pension plans: report
New figures confirm that life expectancy in Canada has increased — a trend that poses a threat for pension plan sponsors and, ultimately, for plan members.
According to updated mortality tables recently released by the Canadian Institute of Actuaries, the life expectancy of a 60-year-old male today has increased by 2.9 years — from 24.4 to 27.3 years — compared to pension mortality tables currently in use.
The life expectancy of a 60-year-old woman has increased by 2.7 years — from 26.7 to 29.4 years.
All of which is good news, of course, unless you're the one who has to figure out how to pay for those extra golden years.
If plan sponsors need to cover more retirees for longer periods of time, this will inevitably lead to increased pension liabilities for employers and also require bigger pension contributions from their workers, experts warn.
"Increasing life expectancy could mean that employees with a DC or capital accumulation plan will need to save more in order to afford retirement," says Michelle Loder, a consultant with Towers Watson.
"This could result in employees delaying their retirement until they have accumulated sufficient retirement savings, possibly challenging employers’ ability to manage career progression and workforce objectives."
Although the effect will vary from plan to plan, acceptance of the study's prediction of future mortality improvements could also immediately increase pension accounting liabilities by 5% to 10% for many plans, Towers Watson estimates.
That means the retirement age in many plans will need to go up, Jim Leech, CEO of the giant Ontario Teachers’ Pension Plan, told the Globe and Mail recently.
"Guaranteed benefit levels shouldn’t necessarily have all the bells and whistles. Things like early retirement provisions, the ability to retire when you’re 55, it’s nice but somebody has to pay for it. … These things need to be made contingent, so they’re not guaranteed; they’re there if there's enough money for them."
Has your employer been talking about increased contributions to the pension plan recently? How have things been changing?
By Gordon Powers, MSN Money
Posted by: Kent | Sep 5, 2021 5:13:01 PM
This isn't news to me...and it shouldn't be news to anyone. We will have a real crisis on our hands that younger gnerations are going to have to pay for decades...long after the boomers have stripped pension plans bare. I think it's ironic that this story mentions the teachers pension plan. Government pension plans like theirs is the biggest part of the problem...but just try to tell bureaucrats they need to have the same kind of plans as normal taxpayers...their unions would rather march in the street than settle for what people in the real world get.
Posted by: IC | Sep 7, 2021 4:31:32 AM
OK! Just retired, first month, at age sixty three. Based on what I read, soon they might pass a law stating that if you live more than 10 years after collecting there should be a mandatory death penalty! Life expectancy increases are what they are and life length will increase like or not people!
A message to Kent: I am a boomer you should thank the boomers if society is where it is now, I worked hard all my life like most boomers, and your comments are out of place(except for the governments pension plans).
Posted by: Mario | Sep 8, 2021 7:30:49 AM
I think the main purpose of this article is to mention that funds accumulated during the time workers were busy in their professional life were insufficient to cover their future retirement. Now, the money missing has to be paid out by the younger generation and they are right to complain about it. It is not their fault and the shortfall should be covered by the retirees and not by them!
The overly gross retirement fund entitlement were often gained by strikes and by labour unrest in the 70's and 80's and were agreed to by spineless governments and/or previous managements.
''Normal people'' who have to build their pensions themselves have all the risks of underfunding attached to them. ''Kent'' only mentions this unbalance and suggests everyone should be treated the same!
I'm an early retiree who had to fund his pension entirely through savings and I look enviously to the ones retiring from large corporations such as universities, hydro-Quebec, the government and such and can't believe they get what amounts to ''millions of dollars'' of funding per employee! On top of having to save for my retirement, I have to fill up the retirement fund of other retirees who have those guaranteed pensions. Prices of goods will be higher and general taxes will also be higher to ''help'' those poor retirees who got a gift of a longer life span.
It's not only the young generation who is troubled with the future costs of pensions, ''normal retirees'' too are somewhat troubled by this state of affairs!!!!
Posted by: eric | Sep 8, 2021 7:59:39 AM
As a sideline is there ever any mention of having the maximum age of converting an RRSP into an RRIF from 71 to something higher ? That might help an aging population who are living and working longer and therefore have the ability to contribute to an RRSP beyond what was originally thought to be the case.
Posted by: dj | Sep 8, 2021 2:08:24 PM
Amazing no one remembers the successive governments who raided the pension plans to cover misspending (both cons and liberals ) then we get this kind of blather from the bean counters about how pensioners cant retire cause there isnt enough money in the plans. KEEP DRINKING THE COOLAID
Posted by: fraz | Sep 8, 2021 4:27:09 PM
The combination of people living longer AND the baby boomer generation (our largest demographic group) drawing on pension plans in greater numbers means we'll all need to work longer, pay more into plans, and enjoy fewer retirement benefits. Expect 65+ year-old teachers trying to connect and relate with our children and teens. Expect 65+ year-old doctors and nurses trying to stay current and cutting-edge. Expect our workforce being older, grumpier, and poorer. The government will undoubtedly continue their attacks on our public services (just look at all the groups who have been squeezed in recent years - postal workers, federal civil servants, teachers, doctors, nurses, Air Canada, etc.) seeking to demonize these groups to facilitate/justify the cuts. Expect labour unrest for the foreseeable future. But I expect that our corporations will continue to enjoy record low tax rates, CEOs and managers will continue to receive astronomical bonuses and the gap between the wealthy and the less privileged will continue to grow as the middle class disappears. A solution could be to privatize health care and education. Then we could finally have a model that all neo-cons and "normal taxpayers" would embrace. If you can afford a private education for your children and a private health care plan, good for you and yours. If you can't, there are plenty of privatized prisons for your troubled offspring.
Posted by: mike g | Sep 8, 2021 5:36:01 PM
What angers me is the aforementioned CEO's and their ilk saying"Do as I say,not as I do".Fraser Institute types who say minimum wages should be frozen,but don't question when managers get almost exponential increases in income.There's not too many like Lee Iococca who accepted a $1 salary to lead by example.
Posted by: Phil | Sep 8, 2021 7:14:29 PM
THE MAIN QUESTION WE NEED TO FOCUS IS WHY WERE THESE PENSION FUNDS INVESTED IN FOREIGN LANDS?
WHAT ARE THE AUDIT FINDINGS OF PENSION THE INVESTMENTS?
WHY IS THE MONEY MELITING AWAY?
WHY WERE THEY NOT INVESTED IN GILT EDGED SECURITY?
CANADIAN PENSION FUNDS SHOULD BE INVESTED IN CANADA AND NOT MOVED TO FOREIGN LANDS AND HAVE LESS TRANSPARENCY
CANADA HAS PLENTY OF REAL ESTATE INVESTMENT OPEN AND ITS NOT ABOUT MALLS WE NEED TO THINK OUT SIDE THE BOX (EG)HOME OWNERSHIP
PEOPLE AT THE HEAD ARE ACCOUNTABLE FOR EVERY DIME
Posted by: Darwin Recruiting Agent | Sep 8, 2021 7:58:14 PM
Heyyyyyyyyyyyyy... not to worry. In about 25-30 years... ALL the baby boomers will be dead and the "next", "new" generation will inherit their parents $$$ and they'll ALL get their chance to become millionaires... assuming they haven't all credit carded their little lives away... as they're prone to do right now.
But all is not doom and gloom... the X-Y-Zzzzzzzz Generations needn't worry about their "future"... they're already deeply inbedded in their own "live NOW -- spend NOW" mindsets.
Posted by: Terry Gilmour | Sep 8, 2021 8:09:32 PM
If you need more for retirement then put more in. Give up that new 2nd car or maybe no expensive vacation this year!
If you are retired and need more $$$ ( are healthy enough) , get a part time job!
Maybe it is time for your kids to support them selves!
If you can work longer then do it , Canadian businesses needs you!
Don't complain about there is no one to take care of you....Take care of your self!
Remember you are CANADIAN!
Posted by: John | Sep 8, 2021 10:27:18 PM
@Terry et al. I am a boomer. I own 7 cars, and 4 multi-million $ homes. I worked by ass off for these. I expect nothing from the government or any of the younger generation to support my retirement. I fund my own! And yes, my children will be filthy rich when my wife and I die, and that is how it should be.
Posted by: Reverse Raisismus | Sep 11, 2021 12:58:47 PM
Mario, younger generation are new emigrants (from ?) taking the jobs from our children and from our parents mostly with no education.
Posted by: don | Sep 17, 2021 6:25:52 PM
Bill Gates and many others don't agree " that is the way it should be"