2. Contributions to Increase in Life Expectancy at Age 65 (1993 to 2013).
Empirical evidence in Table 20 shows the contributions to the increase in life expectancy at age 65 of retirement beneficiaries by age-group over the last 20 years (1993-2013). Over the first half of the period, from 1993 to 2003, about 50% of the increase in life expectancy at age 65 for males (0.75 out of 1.5 years) came from mortality improvements (i.e., reductions in mortality rates) at ages 75 and over. For females, the corresponding proportion is 67% (0.4 out of 0.6 years) over the same period.
These proportions reached 65% (1.17 out of 1.8 years) for males and 73% (1.02 out of 1.4 years) for females over the most recent 10-year period (2003-2013).
As the distribution of deaths moves towards older ages in the future, the trend of mortality
improvements shifting toward the older ages is expected to continue, in turn leading to additional increases in life expectancy at age 65. Over the last 10 years (2003-2013), life expectancy at age 65 of male beneficiaries grew by about 1.8 years or 0.3 of a year more than the previous 10-year period 1993-2003, while life expectancy at age 65 of female beneficiaries grew by 1.4 years or 0.8 of year more than over 1993-2003.
Table 20 Contribution to Increase in Life Expectancy at Age 65
Change Attributable to Age Group
1993-2003 2003-2013
Males Females Males Females
65-74 0.75 50% 0.20 33% 0.63 35% 0.38 27%
75-79 0.29 19% 0.13 22% 0.45 25% 0.28 20%
80-84 0.29 19% 0.13 22% 0.36 20% 0.28 20%
85-89 0.09 6% 0.07 12% 0.27 15% 0.28 20%
90+ 0.09 6% 0.07 11% 0.09 5% 0.18 13%
Total Change in Life Expectancy at Age 65 1.5 100% 0.6 100% 1.8 100% 1.4 100%
18 20 22 24
1990 1995 2000 2005 2010
Year Less than 37.5 %
100 % Level of pension
H. Work and Retirement Periods of CPP Beneficiaries
This section presents an historical overview of the length of work and retirement periods of contributors and beneficiaries of the Canada Pension Plan.
Table 21 shows the average age of first time CPP contributors, the average age of new CPP retirement beneficiaries, as well as information regarding the actual and expected ages at death for the given cohort of CPP retirement beneficiaries.
It should be noted, that for any given year the first time CPP contributors and new CPP retirement beneficiaries are analyzed on the calendar year basis, i.e., they are not the same group of CPP participants. On the contrary, the analyses of the actual and expected ages at death are done on the cohort basis, i.e., new CPP retirement beneficiaries of a given year are followed through years to the date of their death. The following definitions provide a more detailed explanation of the information included in Table 21 and Chart 18.
Definitions
Average Age of First Time CPP Contributors
A first time CPP contributor is an individual who makes a valid CPP contribution for the first time after reaching age 18. A valid contribution is one that is made on annual earnings that are greater than the Year's Basic Exemption ($3,500) and where the contribution is not fully refunded.
As the Plan has slowly matured since its inception, the average age of first time CPP contributors decreased from about 25 years in the early 1970s to 22 years by the mid-1980s. The longer period of formal post-secondary education as well as changes in immigration policies may have resulted in the reversal of this trend over the 1990s and 2000s. Over the last decade, the age of first time
contributors has varied between 24.0 and 24.71. Average Age of New CPP Retirement Beneficiaries
The average age of new CPP retirement beneficiaries represents the average age at their benefit take-up date. At the outset of the Plan, there was an initial 10-year transition period before one could receive a full retirement pension in 1976. During the transition period, there was a prorating factor that applied to the pension that grew from 10% in 1967 to 100% for 1976 and thereafter. This transition provision created an incentive to delay retirement, and the average age of new CPP retirement beneficiaries was over age 66 until 1976. The introduction in 1987 of the flexible retirement take-up age provision drove the average age of new retirement beneficiaries below 65.
Over the last decade, the average age at pension take-up has stabilized at around 62.5 years.
Death Ratio
For the purpose of this study, the death ratio for any given year is equal to the ratio of the number of new CPP retirement beneficiaries for that year who died prior to July 2014 to the total number of new CPP retirement beneficiaries for that year. For example, almost all CPP retirement beneficiaries who took their benefits in 1970 died by July 2014. On the other side of the spectrum, only 1% of 2013 new CPP retirement beneficiaries died by July 2014.
Actual Average Age at Death for Retirees’ Cohort
The actual average age at death for a given retirees’ cohort represents the actual average age at death for those members of a CPP retirement beneficiaries’ cohort who took their CPP retirement benefit in a given year and who died prior to July 2014. For example, the cohort of new CPP retirement
beneficiaries in 1970 who died prior to July 2014 has an average age at death of 80.8. In comparison, the cohort of new CPP retirement beneficiaries in 2013 who died prior to July 2014 have an average age at death of 64.
Expected Average Age at Death for Retirees’ Cohort (26th CPP Actuarial Report)
The expected average age at death for a given retirees’ cohort is the weighted average of the actual average age at death for deceased members of this cohort and the expected average age at death for the remaining members of this cohort as at July 2014. The expected average age at death for the remaining members as at July 2014 is determined using the assumptions of the 26th CPP Actuarial Report as at 31 December 2012 including the assumed future mortality improvements.
The Evolution of the Length of Work and Retirement Periods
As it can be seen from Table 21, the actual and expected average ages at death for a retirees’ cohort are very close for earlier cohorts of CPP retirement beneficiaries, since the majority of the retirees of these cohorts died prior to July 2014 (death ratios are close to one). As time progresses, cohorts of retirees become younger, and the difference between the actual and expected average ages of death becomes larger.
Table 21 Evolution of Various Average Ages of CPP Contributors and Retirees (1970-2013)
(1) Currently, 20% of all first-time CPP contributors are over age 30.