Working longer could bolster Canada’s retirement system: index

Canada’s retirement system slipped two spots, according to the latest Marsh CFA Institute Global Pension Index, dropping from 16th to 18th out of 55 countries, but maintains its “B” rating status.

Hubert Tremblay, partner and senior wealth advisor at Marsh Canada in Montreal, attributes Canada’s shift more to methodology than to any deterioration in the system itself. He acknowledged that the same structural weaknesses flagged in previous editions remain, pointing to thin private-sector pension coverage and a retirement system that would benefit from older Canadians staying in the workforce longer.

“There are a lot of conversations going on in Canada on coverage but there is no real concrete actions on the coverage rate for private sector workers,” said Tremblay.

“The objective of the Canadian retirement system is not to score high on the Marsh Global Pension Index but rather the opposite,” he noted. “The Index is there to read what we see in the Canadian retirement system. We’re all working to improve the system, not for the grades and not to compare ourselves with other countries. There are no two similar systems around the globe. It depends a lot on where we come from as a nation. The real objective is to make our system work and make it better.”

Aging demographics test pension sustainability

This year’s feature chapter on aging populations calls for greater flexibility in pension design, something Tremblay argues Canada already has. Unlike many countries where mandatory public pensions lock workers into a fixed eligibility age of 65 or 67, the CPP allows Canadians to start drawing benefits anywhere from age 60 to 70, and the QPP extends that window to 72.

Additionally, waiting until 70 produces a larger monthly payment, guaranteed for life and indexed to inflation. That built-in range is precisely what the index says pension systems worldwide need to withstand demographic pressure – and Canada has had it for years.

“I think for us, the challenge is not to implement the changes to make it more flexible, but to explain all the flexibility that’s already within the system for Canadians,” he said, underscoring that financial planners and advisors need to communicate the value of deferral more effectively, because the difference between commencing at 65 and waiting until 70 compounds over a retirement that could last decades.

The limits of extending work participation for pension sustainability

The arithmetic of working longer is straightforward, Tremblay said. People who stay in the workforce continue to build savings while shortening the period they need to draw on them. They also delay the start of CPP or QPP benefits, which produces a larger monthly payment. And they keep contributing to the broader economy – tax revenue, consumer spending, provincial output.

Meanwhile, falling fertility rates add urgency. Canada’s birth rate has declined steadily over the past decade, as of 2024, and sits well below the replacement level. Actuaries at both the CPP and QPP already factor demographic shifts and immigration projections into their long-term models, but Tremblay notes that the immigration side of the equation is as much political as it is demographic.

The ups and downs in Canadian immigration policy have also made it harder to treat migration as a reliable input in long-term pension planning. Those conversations need to be folded into the broader discussion about the system’s future sustainability, Tremblay said.

Still, he doesn’t believe extended work is a blanket solution. After all, workers in physically demanding jobs may not have the option of staying on past 65, and any policy push in that direction has to account for that reality.

“We need to encourage people working longer if they can, but we can’t make it mandatory in any way because some people won’t be able to do it,” he said.

How the Index is measured

According to Tremblay, the index is built from roughly 50 indicators, drawn from OECD and World Bank data alongside assessments from Marsh consultants in each country. Those indicators feed into three sub-indices, adequacy (40 per cent), sustainability (35 per cent), and integrity (25 per cent), which together produce a single numerical score.

The top ranked systems according to Marsh’s Index, which earned the “A” grade were: the Netherlands (85.8, highest overall), Denmark (84.1), Iceland (84.0), Singapore (82.0), Israel (81.9), and Australia (80.6 - newly upgraded to A from B+ in 2025). Scores range from 85.8 at the top to 43.7. That ranking goes to Argentina.

A B grade with room to grow

Canada scored 70.6, unchanged from Marsh’s 2025 report. Its sub-index breakdown is adequacy 67.1 (B), sustainability 66.6 (B) and integrity 81.7 (A). The sustainability score dipped from 67.0 to 66.6, while integrity improved from 80.2 to 81.7.

Canada’s adequacy score benefits from a well-organized system with multiple income sources and strong tax-assisted savings vehicles, Tremblay said. He believes the protection floor for lower-income retirees is solid, particularly as Old Age Security and the Guaranteed Income Supplement have helped push the retirement poverty rate down to roughly five per cent, according to Tremblay.

“When you look at low-income earners, the system is really good to try to get everybody out of poverty in retirement years so this is something that we've done really well in the last few decades. That's a success of the Canadian retirement system in terms of adequacy,” noted Tremblay.

Sustainability is where Canada loses ground, dragged down by weak occupational pension coverage in the private sector. Integrity, meanwhile, is the country’s strongest pillar. Tremblay points to pension governance standards in the public sector and the passage of Bill C-228 in 2023, which established super-priority for pension deficits in employer bankruptcy proceedings, as some of the key reasons for the rating.

“We’ve always been good on integrity because we know how to manage pension plans in Canada,” he said. “There’s really good governance in the public sector pension plans. There’s good supervision of private sector pension plans.”

Ultimately, Tremblay said Canadians should take confidence in a retirement system that, despite its complexity, is fundamentally sound. He underscored that ranking 18th out of 55 countries isn’t a cause for alarm and the public pillars – CPP, QPP, OAS, and the Guaranteed Income Supplement – provide a reliable base.

The onus is on private-sector workers for pension coverage

The system is also designed as a combination of sources, and private-sector workers without occupational pension coverage need to make up the difference on their own. Canada’s tax-advantaged savings vehicles – RRSPs, TFSAs – give individuals the tools to do that, and Tremblay said even modest increases in savings rates compound over a career.

“Even if they save a bit more, it will help over the long term to make it work for them in retirement,” he said, emphasizing employees also need to bear some responsibility to push for change from the employer side. Even where pension plans aren’t mandatory, employees who press their employers to set up retirement savings arrangements may get results.

While it might not be a generous defined benefit plan, Tremblay said, “if [employees] can convince their employer to contribute some money to their retirement, plan sponsors might understand the benefit it has to their workers and they might want to put in place more retirement saving arrangements for their workers.”