Canada Can Do More for The Retirement of Its Citizens

Canadian pension system can be improved a lot more to help preparing for the retirement of its people. We must have a positive view toward the future retirement in Canada. Retirement should not be viewed as burden of the society but rather as a way of paving a new road for better contributing to the society, a new force of itself when the percentage of aging Canadian population is increased in the general public.

The pension system in Canada rely on four components:

1. The Canada Pension Plan (CPP) pension benefit is a benefit depending upon the time and the amount of contributing during employment time. The amount of contributing to the plan is set by government and tend to increase to accommodate the aging population. The retirement age will be raised to 67 in 2023. It is a government measure to deal with the increased aging population and it is understandable, but the government could commit to do more for this concern. Extension of pension at the provincial level is worth to consider. Other tax incentives similar to RRSP for mortgage payment also help.

2. The Old Age Security (OAS) is a benefit depending upon residence time in Canada, that includes the Guaranteed Income Supplement (GIS), another benefit received if the income of retiree is below certain threshold. If the spouse is between 60 and 64 and the other received GIS, she or he also eligible to receive Allowance, a benefit to raise the family income to a certain level determined by government. 

3. Employer Pension Plan: many large companies used to have retirement pension program set up for employees. This type of pension is still strong with government sponsored plan but diminishing with companies of the private sector in the recent years. The government can engage in conversation with companies to find way that encourage companies to keep the pension plan or even increase the contribution to the plan through tax incentive etc...

4. Individual registered retirement saving plan (RRSP) is a governmental tax incentive saving. Individual can make yearly contribution up to a limit and get the personal income tax reduced, depending on the tax bracket the tax payer will get the tax refund more or less. In the current law this retirement saving will be converted to a Retirement Income Plan such as Registered Retirement Income Fund (RRIF)at the age of 71. RRSP withdrawal will be added to other income and will be taxed at that tax bracket. Withdrawal after 65 or when your income is low will be taxed much lower. At 71 you must withdraw money from RRIF according to a schedule determined by government, the first year is usually about 10% of the fund and diminished afterward.

Recent polls suggested that people are planning to work past age 65, some are until 70. The economic condition was not favorable for many decades due to globalization and global recession. The employment was uncertain. The stock market is jittery. Still with some saving discipline and commitment of Canada government, Canadians still can be able to retire at 65. The pension system of Canada is one of the strongest in the world according to 2013 Mercer Global Pension Index. Although the housing price in the last twenty years had caused some saving problem for Canadians but with some good budget balancing there is still good saving in the long term for this purpose.