No QPP pension from 60 years?

Quebec is currently facing major problems such as the aging of the population, the economic vulnerability of a large number of elderly people, and a labor shortage.

One of the solutions? Raise the minimum eligibility age for a QPP (Quebec Pension Plan) pension from 60 to 62 years. Also increase the maximum age for starting pension withdrawal from 70 to 72 years. Growth over a seven-year period is inconsistent.

Jean-Francois Therrien, chief executive of the QPP, proposed the same, among other things, in a January launch document on the wider public consultation on the QPP launched last week by Finance Minister Eric Girard.

Currently

I remind you that the full QPP pension is payable when you start withdrawing it at the age of 65. When you choose to cash in early, the annuity is reduced by the number of months at the rate of 0.6% per month. A person who decides to withdraw it at age 60 will see their pension reduced by 36% compared to the full pension at age 65.

And a person who chooses to wait until age 70, on his part, is entitled to a 42% increased pension, which means an increase of 0.7% for every month that passes from his 65th birthday.

Target bonus

If the Legault government agrees to go ahead with a proposal to raise the minimum age from 60 to 62, chief actuary Jean-Francois Therin calculates that a person (entitled to the maximum amount) would receive a 22% higher pension over life, or $2,166 a year.

In 2021, there will be 46,700 people applying for their pension at the age of 60.

By increasing the maximum eligibility age for QPP pension from 70 to 72, a person can get 12% higher pension for life. For an individual eligible for the maximum amount, this represents an additional $2,527 per year.

The question of life expectancy

As explained in the public consultation document by QPP’s Chief Actuary, the life expectancy of the population is increasing, and so is the retirement age.

In 1966, a 65-year-old could live an average of 15 more years. Today, a retiree at this age is expected to have about 21 years of retirement. In about forty years, such a person’s retirement would be more than 24 years.

“To ensure they have enough income to last them through their retirement, workers should save more, work longer and/or postpone the start of their QPP retirement pension payment. »

In 2019, 41% of people earning between $30,000 and $50,000 a year have no retirement savings in addition to their QPP contributions.

Delaying eligibility for the QPP pension by two years from age 60 to 62 will help address two issues: the financial vulnerability of many retirees and the labor shortage.

Advantage of QPP

Unlike many private pension plans, the QPP offers a pension that is fully indexed to the cost of living index. For so long, it’s clearly worth its weight in gold.

Another advantage: it is fully guaranteed life annuity, protected from the upheavals of financial markets and the risk of bankruptcy.

QPP has a solid financial balance. So much so that the contribution rates for Basic Plan (10.80% of contributory income) and Additional Plan (2.0% of contributory income) will now be capped.

By the end of 2021, the QPP reserve stands at $106 billion. It will reach 553 billion dollars in 25 years. And in 50 years, nothing less than $1,800 billion.

More than half of the QPP Reserve’s assets are estimated to come from the investment income of the Caisse de depot et placement du Quebec.