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Retirement Behaviour and the CPP: A Simulation Model

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Author Info
Allan Pollock
Timothy C. Sargent
Abstract

There is a growing concern that the ratio of workers to non-workers in Canada will likely fall dramatically as a result of a demographic trend towards an older population and a labour force trend towards earlier retirement. The high proportion of non-workers may place increasing pressure on government finances, if non-workers use public services more intensively and generate less in tax revenue than workers, as is often assumed. This concern has led many to question the public sector’s influence on retirement behaviour. This paper provides estimates of the effects of modifications to the Canada Pension Plan (CPP) on retirement behaviour using a dynamic simulation model. We show how various changes in the structure of benefits and contributions can alter the age at which individuals choose to retire. Specifically, we find that eliminating the requirement that individuals retire in order to claim CPP benefits could increase the retirement age.

Il existe de plus en plus d’inquiétude face au déclin potentiel du ratio du nombre de travailleurs et du nombre de personnes ne travaillant pas suite aux changements démographiques impliquant une population vieillissante jumelée à une hausse de la tendance à la retraite anticipée. La forte proportion de personnes ne travaillant pas peut causer de plus en plus de pressions sur les finances gouvernementales si les personnes non au travail font un usage plus intensif des services publics mais générèrent moins de recettes fiscales comme c’est souvent supposé. Cette préoccupation a poussé plusieurs personnes à questionner l’influence du secteur public sur le comportement à l’égard de la retraite. Ce travail présente des estimations sur les effets des modifications au Régime de pension du Canada (RPC) sur le comportement à l’égard de la retraite à l’aide d’un modèle dynamique de simulation. Nous présentons dans quelle mesure divers changements dans la structure des bénéfices et des contributions peuvent changer l’âge auquel un individu décide de prendre sa retraite. Plus particulièrement, nous trouvons que l’élimination de l’exigence du départ à la retraite pour réclamer les bénéfices du RPC pourrait hausser l’âge de la retraite.

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Paper provided by Department of Finance Canada in its series Working Papers-Department of Finance Canada with number 2004-08.

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Handle: RePEc:fca:wpfnca:2004-08

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