A Short History of Long Retirements in Canada

In present-day Canada, retirement is more of an expectation than a dream. Most Canadians plan to spend their final years in a prolonged period of rest, recreation, and relaxation. After decades of hard work, retirement seems like a fair and natural final chapter. However, because the concept of retirement is so prevalent in twenty-first century Canada, we often overlook the fact that retirement, particularly a long leisurely retirement, is a truly modern concept.

Prior to the late nineteenth century, retirement as we know it didn’t exist. Other than the aristocracy who had the wealth, land, or power to hire others to work, people commonly worked well into their old age and relied upon family support when they were physically unable to work.  

The modern concept of retirement was born in Germany during the Second Industrial Revolution. In the 1880s, under pressure from an emerging socialist opposition, German Chancellor Otto von Bismarck advocated for government sponsored support for the elderly. In an 1881 speech, Bismarck famously stated, “those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” In 1889, Germany implemented a retirement program that provided financial support to those 70 and older, hoping this would both aid their aging citizens and open more opportunities for young workers. 

In the following decades, faced with the challenges of industrialization, urbanization, recessions, and global war, Canada and various other nations followed Germany’s lead. 

The urbanization of the late nineteenth and early twentieth century had a great impact on Canada’s older citizens. These migrations caused the family support system that defined farm life to gradually dissolve, leaving many seniors impoverished during their final years.  

To combat this problem, Canadian activists began calling for a government funded old age pension system. This subject was first discussed in the House of Commons in 1906, but the government ultimately balked at the proposal due to the cost and adopted a government annuities program instead. 

Passed in 1908, the Canadian Government Annuities Act allowed individuals to purchase annuities from the government in exchange for fixed yearly benefits that would be paid out once the buyer reached a specified age (this age varied from case to case). Although this was the first significant piece of legislation related to retirement in Canada, it was fundamentally flawed. The people that needed this support the most, generally couldn’t afford to buy annuities.  

The modern Canadian pension system slowly emerged out of the social challenges and political climate of the first half of the twentieth century. In 1927, the Old Age Pension Act was passed after a political compromise between the Liberals and left-wing members of the House of Commons. The foundation of Canada’s modern retirement system, this act set aside meager funds to aid elderly Canadian citizens who were struggling to make ends meet. Although this act represented a monumental movement towards old age security in Canada, the program was also discriminatory and highly stigmatized. Aid was only available to British subjects living in Canada. Many Indigenous people and immigrants were not eligible. Additionally, to receive a pension, individuals had to go through a demeaning process known as a “means test,” which required applicants to demonstrate their inability to support themselves. 

The poverty that engulfed Canada during the Great Depression and the slow recovery of many seniors created new momentum to devise a pension system that would better support the elderly in Canada. This momentum culminated in the Old Age Security Act (1952), which granted a federally funded pension to all men and women in Canada age 70 and older. At the time the maximum pension anyone could receive was $480 per year, and unfortunately many seniors still struggled to make ends meet.  

Since 1952, many changes have been made to the old age security system in Canada. Changes like decreasing the age that people can begin receiving old age benefits have helped reduced poverty amongst seniors, while programs such as the Canada Pension Plan, the Registered Retirement Savings Plan (RRSP), and the Tax-Free Savings Account (TFSA) have provided Canadians with new ways to save for their retirement years.   

So, even though retirement has become a fundamental part of Canada’s economic system, the programs that have enabled retirement are only a few generations old. 

Long retirements are an even more recent phenomenon. Beginning with Bismarck, the social programs implemented to support retirement were intended to last only a few years. In 1952, when Canada passed the Old Age Security Act, for example, life expectancy in Canada was 69 years and pensions began at age 70. As life expectancy has gradually increased over the last 70 years, we have gained the opportunity to experience longer retirements, but have simultaneously had to figure out how we are going to support ourselves financially over our retirement years.   

What should you take away from this brief historical survey? 

Two things seem to stand out. 

First, we are lucky. Although we all experience challenges, we are living in the Golden Age of Retirement. We have more opportunities to live out our final years doing what we want than almost anyone else in history. 

Second, in order to benefit from the retirement opportunities that modern medicine and social security have enabled, we have to work. Not only do we need to find a job, we also have to work to diligently save enough money to ensure that we have the financial stability to sustain ourselves over a long and happy retirement.