Fear is robbing Canadians of secure retirements. This simple CPP/QPP tweak can change that

This opinion piece by Bonnie-Jeanne MacDonald was originally published in The Globe and Mail.

A hidden retirement crisis is unfolding in Canada.

For decades, the focus has rightly been on low-income older Canadians. But the next wave of retirees – what I call the Vulnerable Massive Middle – are quietly heading toward a different kind of insecurity.

They’ve worked hard, saved some, but lack the guaranteed workplace pensions their parents once enjoyed. They’re exposed – and they don’t even know it.

More than 60 per cent of Canadian workers have no workplace pension. In the private sector, 90 per cent lack the gold-standard defined-benefit plans that once ensured stable income for life.

As a result, millions are heading into longer retirements with fewer family supports, rising health and long-term-care costs, and no secure lifetime income beyond the CPP, QPP and OAS.

The Vulnerable Massive Middle will make up more than a third of Canada’s future older population. Without change, study after study shows they’re heading toward a retirement crisis.

The consequences won’t just be personal. They’ll be national: higher reliance on income-tested programs, more pressure on health budgets, and more adult children leaving work to care for aging parents.

Fortunately, Canada already has a built-in solution: the option to delay CPP/QPP benefits.

Few realize that by waiting until age 70, retirees can more than double their monthly pension compared with taking it at 60. Delaying CPP or QPP is like buying a secure, inflation-protected, government-backed pension at half price – a deal unmatched in the private market. It protects against the two greatest financial fears in retirement: inflation and running out of money.

Yet nine out of ten Canadians still claim by 65, even when they don’t need the money. The result: The average person gives up roughly $100,000 in lifetime income by claiming at 60 instead of 70 – about the same as the median RRSP savings at retirement.

Why would anyone walk away from such a huge win? The answer isn’t math – it’s psychology.

In a research paper series on how to improve CPP/QPP decisions that I co-authored with Doug Chandler, Barbara Sanders and Alyssa Hodder at the National Institute on Ageing, we found that for those who can afford to wait, the main reason for claiming early isn’t financial – it’s fear.

To most people, delaying CPP or QPP feels like a gamble with death: “If I die soon, I’ll get nothing.” That short-term fear overwhelms the far greater long-term risk of outliving one’s savings.

We can’t educate that fear away. Decades of research show people don’t act on spreadsheets – they act on feelings.

That’s why I developed the Pension Delay Guarantee, a simple, low-cost reform that flips the psychology of fear on its head.

Here’s how it works: If someone delays CPP/QPP past 60 but dies before the higher benefits “catch up,” their estate receives a one-time payment for the missed amount.

In plain language: If you delay and die early, the guarantee ensures you don’t lose out.

This small guarantee changes everything. Instead of feeling like a gamble, delaying feels like insurance. Instead of “What if I die soon?”, people think, “I’ve got nothing to lose by waiting, and everything to gain.”

By removing fear, retirees can make decisions that truly fit their circumstances, both now and decades from now.

And it works. Similar pension programs show that introducing a modest death benefit is the turning point in encouraging people to choose higher, lifelong income streams. The cost is minimal – just pennies on the dollar, because few people die before the breakeven age.

For members of the Vulnerable Massive Middle – who may rely almost entirely on CPP/QPP and OAS – that extra income could be life-changing. It can mean the difference between security and strain, dignity and dependence in later life.

This is the kind of smart, low-cost reform Canada needs. It requires no new taxes or programs – just a small improvement to an established program that will help millions make better, more confident decisions.

This week, I had the privilege of presenting the proposal to Canada’s federal, provincial and territorial officials responsible for the CPP.

The timing couldn’t be more critical. The next review happens in 2026. If policy makers act within that window, the Pension Delay Guarantee could take effect by 2028 – just in time to help the last, largest wave of baby boomers make their claiming decisions. Wait until 2031, and it will be too late.

Thirty years ago, a group of policy heroes acted boldly to save the CPP. Because of their foresight, Canada now has a $700-billion fund and one of the world’s most admired pension systems.

We’re at a similar crossroads today. What we need now is to make one small, transformative change that will help Canadians age with dignity, confidence and stability.

The policy clock is ticking. Let’s act before fear – and inaction – cost Canadians their financial future.

Bonnie-Jeanne MacDonald, PhD, is a Halifax-based actuary. She is a director at the National Institute on Ageing, Toronto Metropolitan University, and Resident Scholar at Eckler Ltd.