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1994
The Road to Retirement:
Demographic and Economic Changes in the 1990s
Selected Highlights
Introduction
The Road to Retirement presents an in-depth analysis of the transition into retirement,
examining the age at which retirement occurs, the reasons why it occurs, how it is
financed, and how changes in the labour market are transforming it. Differences in these
areas are examined across a range of demographic and socio-economic characteristics.
The purpose of the study is to obtain a clearer understanding of the factors contributing
to the decision to retire.
Research Design and Methods
The research is based on quantitative data analysis. The primary data source is the
Survey on Ageing and Independence, a national survey of persons aged 45 and over
fielded by Statistics Canada in 1991. The study also uses several other Statistics Canada
surveys (the Survey of Consumer Finances, the Survey of Work Arrangements, and the
Labour Force Survey) as well as published data from a wide variety of government and
academic sources.
There has been a marked trend towards early retirement over the past fifteen years. Of
retired Canadians, 38 per cent of women and 27 per cent of men left the labour force
before age 60. Expectations of early retirement are prevalent among people in the labour
force.
Program/Policy Implications
"Old age" programs and policies are generally structured around age 65 and are based on
the assumption that retired people and "old" people are part of the same group. This is
no longer the case, and programs serving "old" people no longer serve all retired people.
The capacity of existing "old age" programs to meet the needs of retirees should be
examined.
The availability of Canada/Quebec Pension Plans at age 60 has enabled many Canadians
to leave the labour force. The proportion of Canadians aged 60 to 64 receiving
CPP/QPP Retirement Pensions increased from 20 to 38 per cent between 1987 and
1993. With the baby-boom generation approaching retirement age, the number of early
CPP/QPP recipients will soar in the coming years. This will likely raise concerns
regarding program expenditures. However, given expectations of early retirement,
policies restricting access to early pension benefits will likely meet with public opposition
and complicate the retirement plans already made by many older workers.
Retirement has been reshaped by strategies of work force adjustment undertaken since
the early 1980s. Many older workers are being encouraged to leave their jobs through
financial incentives, such as early pension benefits and "golden handshakes", while many
others are being pushed out of the labour force by layoffs and unemployment. The ability
of older workers to benefit from, or protect themselves from, these changes varies
considerably.
Program/Policy Implications
With people moving into retirement in markedly different ways, there is growing
potential for income inequality among tomorrow's seniors. Involuntary retirees are twice
as likely as voluntary retirees to indicate that their household income is less than
adequate to satisfy their needs.
Efforts to re-integrate unemployed older workers into the labour force are imperative.
The fact that many of these workers persist in their job searches for prolonged periods
suggests they are eager to remain in the labour force.
Since 1980, the proportion of Canadians aged 55 to 64 receiving CPP/QPP Disability
Pensions has more than doubled. This may reflect a lack of financial alternatives available
to displaced older workers. With the "greying" of the labour force and persistently high
rates of unemployment, usage of the Disability Pension program is likely to escalate.
Flexible work hours, part-time employment, and work "non-standard" work
arrangements are used by only a small proportion of older workers to partially or
gradually retire. These jobs are often associated with low wages, poor benefits and
instability.
Policy/Program Implications
Gradual retirement, through part-time or part-year employment, may result in long-term
financial penalties for older workers, since pension entitlements and severance packages
are often based on the worker's final years in the labour force. Under these conditions,
workers who would otherwise be willing to exchange current earnings for greater leisure
time, may be unwilling to do so because of the longer term financial consequences.
The retirement income system is comprised of two components. The first is the public
system, including Old Age Security, the Canada/Quebec Pension Plans and other
programs. The second is the "semi-private" system of tax assisted employer-pension
plans and Registered Retirement Savings Plans (RRSPs). Many Canadians, particularly
those with low incomes and poor quality employment, are effectively excluded from the
semi-private system of retirement income.
Policy/Program Implications
Policies that reinforce the semi-private system, for example, by improving employer-
pension plans or increasing RRSP contribution limits, do little to help Canada's least
well-off retirees.
Seventy per cent of retired women aged 65 and over indicate public pensions and other
programs are their main source of income. The erosion of these programs would weaken
the financial lifeline of many Canadians.
Policies improving women's employment opportunities, such as pay equity and
affirmative action, will subsequently improve their ability to retire with financial security.
Retirement income from private sources is very unevenly distributed across income
quintiles. Among male retirees aged 65 and over, the richest 20 per cent receive about 60
per cent of total aggregate income from private sources, while the poorest 20 per cent
receive about one per cent. This inequality is offset to some degree by income from
public sources (government pensions and programs) which is more evenly distributed.
This situation has changed little in the past decade.
Road to Retirement - Related Material
Canadian Council on Social Development,
309 Cooper Street, 5th Floor,
Ottawa, Ontario, K2P 0G5
Tel: (613) 236-8977, Fax: (613) 236-2750, Web: www.ccsd.ca, Email: council@ccsd.ca
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