Pension expert warns some retirement plans will be a challenge for retirees
People may end up working into their 70s if pension plan rules are not reformed expert says
An expert on pension plans says future retirees may face challenges, if they participate in a defined contribution plan.
James Pierlot spoke in Saskatoon Wednesday at a conference for professionals in the pension planning industry.
According to Pierlot, about 75 per cent of workers with pensions take part in defined contribution plans.
He says at retirement, a person with such a plan must then work out how to manage their account to last them through their retirement years.
"You're going to still have to deal with the problem of managing the money through retirement," Pierlot said. He added that can become a burden, over time.
"When people become older they become less able to manage money," he said. "Think of the person in the old age home at age 75, with dementia, rebalancing their portfolio. That's not a good scene."
He noted that workers with defined benefit pensions have a much easier go of things at retirement. Most federal civil servants, he said, enjoy that type of plan.
He said all employers, including government, are moving to defined contribution plans.
Pierlot said Saskatchewan in particular, has a growing number of workers — in the private sector and in the civil service — enrolled in defined contribution plans.
He said federal rules should be changed to put all retirees on an equal footing.
"If you're in a defined contribution plan chances are you're not going to have an adequate retirement income," Pierlot said. "You think you have a pension plan and you don't."
Without any changes to the current system, Pierlot said many workers are in for a rude surprise at retirement.
"You're going to see people continuing to work," he said. "It would not surprise me if retirement ages in the private sector, which are already much higher than in the public sector, creep up towards 70 years old.
"You're going to see people retiring with less, having a lower standard of living," he added. "You're going to see more demands for income support programs from the federal government and the provincial government such as the Guaranteed Income Supplement.
Pierlot said government should act now, to avoid those scenarios.
With files from CBC's Jennifer Quesnel