Changes to the Québec Pension Plan proposed in the budget

Last February, the Quebec government held a public consultation on possible changes to the Québec Pension Plan (QPP). The directions adopted by the Minister of Finance, following this consultation, were announced in his recent budget speech, even though none of these amendments directly affect public finances.

Undoubtedly, the most discussed element during this consultation, was the postponement of the minimum age to commence receiving a pension from the basic plan as well as from the additional plan. According to the announcement, the government renounces changing this minimum age and instead favors the implementation of incentive measures to keep more experienced workers in the workforce. In addition, measures correcting certain shortcomings in the calculation of the pension penalizing those who choose to remain at work while reducing either their work time or their income.

Job retention measures

1. Make QPP contributions optional from age 65.

As of January 1, 2024, a worker over the age of 65 already receiving their QPP pension will be able to decide whether or not they maintain their QPP contributions and thereby increasing the benefit paid or maintaining the benefit paid to them by the plan. This decision will affect contributions to both the basic plan and the additional plan, as well as employer contributions, since ceasing contributions by the worker will also apply to that of the employer. It is clear that, for the majority of workers, continuing to contribute to the plan is financially advantageous as the additional pension which is granted to the worker provides protection against life longevity and inflation and has, in the majority of cases, a value greater than what they contribute. The fact remains that many retirees will choose to retain this cashflow in the short term and not pay these contributions to improve their pensions. In this context, the quality and availability of information in this regard will be essential.

2. Protect the pension income of workers aged 65 and over.

The government is moving forward with the measure that changes the pension calculation method to ensure that years of low earnings after age 65 cannot affect the average earnings used to calculate the benefit from the basic plan.

Better recognition of special situations

As proposed in the consultation document, the government will examine the possibility of using, both in the basic plan and in the additional plan, a mechanism for recognizing earned credits to better allow for periods of disability, periods during which there is a dependent child as well as the periods of informal and family caregiver. Keep in mind a mechanism in the basic plan already exists to consider periods of disability and those to take care of a child. It will be interesting to follow whether the proposed method modifies the benefit currently provided for in these situations in the basic plan.

Automatic adjustment mechanism

Since the implementation of the basic plan, the financial imbalances have been stabilized with the help of increases in contributions from workers and employers. It is also this adjustment mechanism which is already provided for in the basic plan and which could be applied automatically in the event of a future financial imbalance. No similar automatic mechanism is currently provided for in the additional plan. The government is announcing that it will go ahead with the addition of an automatic mechanism in the additional plan and that this mechanism will allow for cost-sharing between workers, employers and retirees. It is therefore quite possible that this mechanism affects both the contributions paid and the benefits promised by the plan. Similarly, the Minister of Finance mentions that there could also be, in this mechanism, a possible increase in the benefit beyond inflation for retirees if certain criteria were met.

Other measures

The government is announcing its desire to better inform future retirees of the options available to them as well as making them aware of the impact their decisions may have regarding their QPP. Finally, it is proposed to expand the role of Retraite Québec and thus give the organization the means to better play its consulting role concerning the retirement system.

Depending on the nature of the amendment, these changes will be proposed when a bill or draft regulation is tabled.