Canada?s changes to the national pension scheme in the 1990s helped buffer the country against demographic changes that are affecting a number of countries including Japan, Russia and Hong Kong, according to pension consultant Mercer.
?Unlike many countries around the world, Canada acted in the 1990s to help mitigate the future impact of an aging population on its national pension system,? said Scott Clausen, a partner in Mercer?s Canadian retirement business.
The percentage of Canada?s population that is of working age is projected decline to 65% from 69% over the next eight years. That is double the percentage point decline expected in the United States and the United Kingdom, according to Mercer.
Among the steps Canada took in the 1990s was to increase Canada Pension Plan contributions to an amount larger than needed to meet benefit payments at the time. The excess contributions are invested by the Canada Pension Plan Investment Board (CPPIB) and are expected to help mitigate contribution increases or benefit reductions that would otherwise have been required as the population aged, Mercer said.
Canada also took ?significant steps? to reduce its level of federal government debt and, earlier this year, made changes to its Old Age Security program so the start of benefits will ultimately kick in at age 67 rather than 65.
Some notable Canadians such as former Bank of Canada governor David Dodge and David Denison, the former chief executive of the CPPIB, have recently pointed to the successes of the Canada Pension Plan model to explain why expansion of the national scheme might be preferable to the federal government initiative to fill gaps in retirement planning with a pooled pension administered by the banks and insurers for Canadians who don?t have a workplace plan.
Ottawa moved ahead with legislation to create the Pooled Registered Pension Plan (PRPP) in June.
So far, only Quebec has announced its intention to introduce companion legislation to roll out the retirement savings vehicle.
?All provinces agreed to move forward with the PRPP framework at the December 2010 meeting of Finance ministers,? Ted Menzies, minister of state for finance, said in an emailed statement Thursday. Citing a Finance Canada study in 2009 that identified a gap in private savings, he said PRPPs ?are a low-cost savings option will help address that gap.?
A report released by the OECD in June?recognized the role of private pensions in addressing gaps in retirement systems in industrialized countries.
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