State pension benefits starting later around the world

Here in Canada, the “normal” age at which you can start full government retirement benefits – the Canada Pension Plan (CPP) and Old Age Security (OAS) – is 65.

That date probably reflects the old “mandatory retirement” rules of years ago which decreed that at 65, it was time to go.

But with people now living longer and working until they’re older, an article by Schroders notes that moving beyond age 65 for official pension start dates.

For instance, the article notes, in the U.S., pensions start at 66 and will move to 67 in 2027. Australia is similar, and will move to age 67 in 2023. The Netherlands and several other European country are moving to a “67+” start date with links to life expectancy rates, Schroders tells us.

Schroders explains the shift this way.

“The model common in most developed countries – start work at 18 to 21 and retire at around 60 to 65 – no longer looks viable as governments try to balance pension obligations with stretched public finances,” the article tells us.

Another factor, the article continues, is the increase in life expectancy. There is a growing “demographic imbalance where there are fewer retired persons for every retired person,” we are told. Not only are older folks living longer, but the birth rate is declining, meaning the talent pool to replace retiring workers isn’t growing as it once was, the article states.

“Typically, the fertility rate required to replace an existing population is 2.1 children per woman,” the article notes. “According to the latest data, the average for the 35 countries in the Organisation for Economic Co-operation and Development (OECD) is 1.7. Many countries, including Germany, Japan and Spain sit at 1.5 or lower,” Schroders explains.

So the ratio of the working to the “dependant,” those not working any longer, “has fallen and will keep falling for decades,” the article adds.

Lesley-Ann Morgan, Schroders’ Head of Retirement, calls this situation “a ticking timebomb.” Retirement systems “may not be affordable in some countries unless adjustments are made,” and the easiest way to fix them is to move the retirement age forward.

The takeaway for those of us who are not retired is this – pay attention to what’s going on with the CPP and OAS, and retirement rules in general, because they can change. Most recently, the CPP expanded its benefits for future retirees – good news for younger workers – but the power of demographics may mean other changes that are yet to be enacted.

One way you can help protect yourself against future changes in state pension benefits is by having your own retirement nest egg. A great option is the Saskatchewan Pension Plan, which allows you to stash up to $6,600 a year away for retirement. That money is professionally invested, and at retirement, if you are worried you might live to 104 like your mom, SPP has annuity options that ensure you won’t run out of money no matter how many birthday candles they put on the cake. Check out SPP today.

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Is the 11 per cent solution the right retirement number for you?

There’s long been a debate in retirement circles about how much is the right amount to save.

New research from Schroders in the U.S. suggests that non-retired savers around the world are putting away 11.4 per cent of their earnings for life after work.

The biggest savers, according to the Schroders Global Investor Study, which took a look at over 30 countries around the world, are those living in Asia, who put away an impressive 13 per cent of their earnings. The Americas are not far behind at 12.5 per cent, while Europeans save the least, at 9.9 per cent.

However, the folks at Schroders say those numbers fall short of what people may actually need. 

“It’s well known that people aren’t saving enough for retirement but this study shows that even those who are already established investors are not putting away enough money,” states Lesley-Ann Morgan, Head of Retirement at Schroders, in the article.

“There’s also a strong message from those who have already saved: ‘I wish I had saved more,’” she adds.

The problem, Morgan points out, is that people aren’t connecting what they’re saving with what they want to do in the future.

“The pension savings gap is further compounded by the fact we’re in an age of low rates and low returns. To reach their goals, people will need to save even more than savers did in previous generations,” she explains.

“The study shows investors globally are only putting away 11.4 per cent of their income but say they want to retire at age 60. Our analysis shows that someone who started saving for retirement at age 30 is likely to need savings of 15 per cent and above a year if they wanted to retire on 50 per cent of their salary,” she warns.

The article, through charts and examples, goes on to suggest that 15 per cent may be a better savings target.

“People in some countries tend to invest more cautiously and may therefore see lower returns. In Germany, for instance, pension savers have a preference for bonds, which typically have delivered lower returns,” Morgan explains.

“Such savers will need to contribute even more to ensure they realize their retirement goals,” she says.

“The most powerful tool available to savers is time. Start saving at an early age and it makes an incredible difference to the eventual size of your retirement account. The miracle of compounding, where you earn returns on your returns, adds up over 30 or 40 years of saving.”

The takeaway from this article, then, is more is always good with retirement savings – the more you can put away, and the earlier you start, the better things will be when those savings turn into your retirement income.

There’s no question that investing can be tricky. If you’re looking for a way to invest your retirement savings professionally – but at a very low fee – consider the venerable Saskatchewan Pension Plan, now celebrating its 35^th year of operations. SPP offers two professionally managed investment funds to choose from, and has averaged an impressive average rate of return of 8 per cent since its inception. Check them out today!

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