In last week’s spring economic update, the federal government announced plans to reduce the base Canada Pension Plan contribution rate to 9.5 per cent from 9.9 per cent, acknowledging the cost-of-living pressures households face today.
But as stewards of the CPP, federal and provincial finance ministers must balance two questions: Are we collecting the right level of contributions to sustain the plan? And are we delivering the best retirement outcomes?
The rate cut is welcome relief and answers the first question but the second still needs an answer. With the largest cohort of workers in history entering retirement, getting the most out of CPP has never mattered more.
Our suggested solution – the Pension Delay Guarantee (PDG) – would help Canadians do exactly that. The idea is simple: Give people who delay starting their CPP but who die prematurely the money they lost out on. The best part is, there’s enough money to fund this.
The Chief Actuary’s December, 2025, report confirmed that CPP is strong and well-financed. In fact, it’s more than well-financed.
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Today, the fund for base benefits has mushroomed to more than $700-billion, about ten times what CPP pays out in a year. With the current 9.9-per-cent rate, that ratio is projected to reach nearly twenty-one times annual expenditures by century’s end – well beyond the buffer the system was designed to maintain.
The report found that the contribution rate could drop to roughly 9.2 per cent and still keep benefits very well-funded.
That means there is room to lower contributions, improve benefits, or both. Translation: stop putting so much in the piggy bank – and spend some of it, too.
The ministers chose to lower the rate only partway, to 9.5 per cent. If the remaining surplus isn’t spent on benefit improvements like the PDG, the fund will keep growing past levels unprecedented in any social-insurance plan internationally.
The timing is now: every day, roughly a thousand Canadians decide when to start claiming CPP. Most claim by 65, even though waiting pays far more. A pension of $1,000 a month at 65 is only $640 at 60 – but $1,420 at 70.
Delaying from 60 to 70 more than doubles the pension payments – guaranteed, inflation-indexed, for life. Over retirement, that typically adds up to more than $100,000.
I’m a retiree thinking of leaving Canada. What will happen to my CPP, OAS and work pension?
Not everyone can afford to delay. But for those who can, the biggest barrier isn’t education, it’s psychology. They are afraid of dying early and missing out.
The PDG, a CPP reform proposed by Bonnie-Jeanne MacDonald with Doug Chandler at the National Institute on Ageing, Toronto Metropolitan University, removes the fear of dying early.
As outlined in this earlier piece, it provides a safety net for Canadians who delay CPP: In the case of early death, it reimburses the difference between what was actually received and what would have been received had benefits started at 60. Similar mechanisms already exist in other jurisdictions and private annuity markets.
This simple guarantee would help retirees lock into significantly higher lifetime pension income. And it’s more fair: if you die young, you aren’t penalized for waiting. Lower-income Canadians, who have shorter life expectancies on average, have the most to gain.
It requires no taxpayer dollars and can be self-financed within CPP’s existing structure at pennies on the dollar, because only a small minority of contributors die early enough to trigger a payout.
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Presented this fall to federal, provincial and territorial CPP officials, the proposal has won support from a wide range of financial experts, including Rob Carrick, Keith Ambachtsheer, ACPM, CanAge and Observatoire de la retraite.
The case for the PDG is sharpest for a hidden third of future older Canadians: private-sector workers without workplace pensions, neither poor enough for income-tested programs nor wealthy enough to self-insure.
CPP and OAS are increasingly their only secure lifelong income, and their situation is getting worse – longer retirements, smaller families, and rising care costs. And with financial insecurity comes poor health, social isolation and reliance on long-term care, strains that land on public budgets and adult children.
The federal government has kept the door open for additional CPP reforms. Every year of delay is another cohort claiming early and locking in lower benefits for life.
Doug Chandler is a Calgary-based actuary and senior researcher at the National Institute on Ageing (NIA). Talia Bronstein is the NIA’s director of policy. Bonnie-Jeanne MacDonald is a Halifax-based actuary and the NIA’s director of financial security research.
