January 2023
Public consultation on the Québec Pension Plan
As it does every six years, the Quebec government is currently holding a public consultation on the Québec Pension Plan (QPP). This consultation aims to explore various solutions to address the challenges facing the Quebec pension system. Read on to learn more about this process.
The Quebec government has identified key issues that reflect the trends and challenges of the pension sector:
- Increased life expectancy and longer retirement
- Insufficient personal savings for a large number of retirees
- Issues in encouraging job retention for workers ages 60 to 65
Among the solutions identified by the government, many are geared at postponing pension benefits at a later age to foster a new savings payout structure in Quebec.
At this time, beneficiaries can start receiving QPP pension benefits as early as age 60 and as late as age 70. The following scenarios are being considered:
- Raising the minimum and maximum ages of eligibility to 62 and 72, respectively
- Raising the minimum and maximum ages of eligibility to 65 and 75, respectively
Raising the minimum age of eligibility would reduce the number of early retirements and, consequently, pay out higher benefits and reduce the impact of the reduction for early retirement.
Individuals who’ve opted for early pension payments are faced with modest pension payments for the rest of their lives. According to a 2021 survey by Retraite Québec, one out of five beneficiaries who had reached age 70 regretted their decision to apply for their pension at age 60.
Many Quebec pension system experts have recommended raising the maximum age of pension eligibility in recent years, as this would allow beneficiaries to benefit from higher pension benefits after age 70. This would be an excellent way for beneficiaries to optimize the use of their personal savings while mitigating the risks of outliving or using up their retirement savings too quickly. Investment and payout decisions would be streamlined and limited to a number of years after retirement. By allowing a postponement beyond age 70, the additional QPP pension enhancement would provide greater income to many retirees with personal savings.
Workers ages 65 and older that receive QPP benefits must continue to contribute to the QPP. By making contributions optional, the government can encourage these workers to remain employed by increasing their net earnings.
QPP benefits are based on the average of their earnings up until their date of retirement. A person who decides to postpone the start date of their pension after the age of 65 and live off their savings in the meantime may see a reduction in their average pensionable earnings, which may in turn reduce their pension benefits.
Protecting the retirement pension of people aged 65 or over would encourage workers to postpone the start of their pension payment, thereby resulting in higher pension benefits and the use of an effective savings payout mechanism.
During the public consultation, other solutions will be examined:
- Increasing the adjustment factors for early retirement
- Better recognition of periods of disability or of caring for dependent children by adding earned credits
- Recognition of periods of assistance provided by family caregivers
Would you like more information? Contact your Normandin Beaudry consultant or email us.