I have long advocated that retirees should wait until age 70 to start their CPP pension. It makes good financial sense for most people. As the chart shows, that message is starting to gain traction.
Until recently, very few retirees postponed the start of their CPP pensions beyond age 65. The take-up rate for starting CPP at age 70 was minuscule before 2016, less than 1 per cent in fact.
The main reason retirees have long given for starting CPP early is the “bird in the hand” argument – it’s hard to resist collecting a government benefit as soon as you can, even if waiting means you receive much more.
But in 2016, the take-up rate at age 70 started to creep upwards, slowly at first and then much more quickly from 2019 and on. By 2024, the take-up rate at 70 climbed above 7 per cent. The Chief Actuary of the Canada Pension Plan predicts that it will continue to increase.
I am tempted to take credit for this phenomenon since my book, Retirement Income for Life, was first published in 2018. But there are also other reasons why people are starting to collect CPP later.
First, they are retiring later. Second, other experts have also been pointing out the financial advantages of deferring the starting age. And third, the prolonged period of low interest rates has made it hard to argue that one is better off starting early and collecting interest on the payments.
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Of course, not everyone should start their CPP pension later. Those who might be better off starting sooner include people with limited savings, those with health problems who do not expect to live a normal life span, and CPP participants who have earned the maximum CPP pension by age 65 and are still working.
The latter group would be required to continue making CPP contributions if they don’t start receiving CPP pension, even though the additional contributions are of limited benefit to them.
The most heartening aspect of the trend to CPP at 70 is that you will no longer feel alone in your decision. Until 2016, one might have reasonably wondered “if starting CPP late makes so much sense, then why is no one doing it.” That statement is no longer valid.
As an aside, I should point out that the rules under the Quebec Pension Plan (QPP) are slightly different. Quebeckers can actually wait until 72 to collect their QPP pensions. Now that more Canadians outside of Quebec are waiting until 70, perhaps the CPP rules should be changed to align with the QPP.
Frederick Vettese is former chief actuary of Morneau Shepell and author of the PERC retirement calculator (perc-pro.ca)