Early this year, Jonathan Got wrote a piece about the proposed Canada Pension Plan (CPP) money-back guarantee — a death benefit concept developed by Dr. Bonnie-Jeanne MacDonald designed to encourage Canadians to delay receiving CPP benefits.
MacDonald, director of financial security research with the National Institute on Ageing (NIA) at Toronto Metropolitan University’s Ted Rogers School of Management, explained to Got that the guarantee would address the worry many have that they’ll lose out if they delay CPP benefits.
Should a beneficiary delay benefits and die before receiving what they would have received had they claimed at age 60, their estate or survivor would be paid the difference. Worst-case scenario, the beneficiary breaks even.
Canadians can start taking discounted CPP monthly benefits as early as 60. They can receive a full benefit at 65, or an increased benefit if they start later. The latest Canadians can begin taking CPP is at 70.
A 2024 report issued by NIA makes the case in detail.
This fall, MacDonald and the National Institute on Ageing presented the idea to federal, provincial and territorial government representatives. None have responded yet — MacDonald understands they’re running the numbers. Meanwhile, industry participants are supportive.
Count us among those who think this is good for the CPP and good for Canadians.
MacDonald has been working on this for more than a decade. It began with a literature review as the industry was beginning to think more carefully about the decumulation process.
“It was still pretty novel,” MacDonald told me in an interview. “In that research, I saw that this idea of delaying CPP was a really optimal solution.”
She kept digging, and talking through the idea with industry leaders like Malcolm Hamilton and Keith Ambachtsheer.
“Loss aversion will never be solved through financial education,” she said. “We already know this because annuities are impossible to sell without that guarantee.”
MacDonald has taken a widespread problem with significant implications, and applied a solution retiring Canadians will understand. It is the kind of elegant policy proposal that deserves support from financial advisors across the country, who know too well how often clients make the wrong choice.
This article has been updated.