The dust is still settling after the minimum age for OAS benefits was extended to 67 in the 2012 budget, and after changes were also made to public sector pensions. Now, advisors must take a second look at the retirement plans of their clients.
Canadians are living longer and healthier lives, and the government projects there will be nearly twice as many seniors in 2030 as there were in 2011, with the number growing from 5 million to 9.4 million.
As a result of government changes and of the increase in retiring clients over the next decade, it is crucial to analyze the planning elements related to your clients’ retirement, in order to ensure that they’re aligned with each client’s new situation.
In addition, advisors must revisit the retirement plans of clients born between 1958 and 1962 specifically. Due to the transition plan provided in the budget for those affected by the OAS age change, these clients will now receive OAS at different times, based on the particular year and month they were born, so this must be factored into each retirement plan.
“We will have to consider the situations of these particular clients since most of these people will not access OAS at the same times,” says Hélène Marquis, regional director of web advisory services for CIBC Private Investment Counsel. “This will need to be considered when we draw up plans for these particular clients now since it could affect their planning.”
She adds, “In terms of products, we have no clear ideas as of yet. We will have to have an actuary look at the current revision of all available products on the market right now, from pension plans to all the bridges provided by the pension plans.”
One challenge that Marquis is facing is how she’ll plan for those who wish to retire at 60. Advisors used to employ a bridge that clients could utilize until age 65, which would ensure that their benefits stayed the same throughout their entire retirement period. Now these plans will need to span two extra years.
Advisors and clients will have to reevaluate the way pensions are calculated and take a look at the different streams that clients can use to bridge the gap.
“Changes are being made to these types of mechanisms and more,” says Marquis. “Pensions are considered as a whole. If we change the elements of pensions, we have to consider how this affects all the tools used and the process as a whole too.”