On January 21, journalist Stéphanie Grammond, chief editorial writer and head of the Debates section at the newspaper The Press, signed an editorial entitled “Reforming retirement, without twisting your arm”. She pointed out that the Minister of Finance of Quebec, Eric Girard, had tabled a consultation document on the future of the Quebec Pension Plan just before the holidays. The consultations scheduled for February took place on February 8, 9 and 14.
Mme Grammond wrote: “If the reform of pensions in France is necessary to ensure the balance of the system, it is quite different for the RRQ, which is in full health. There is enough money in reserve to ensure the payment of all pensions within 50 years, which is something to be happy about… with caution.
“The changes proposed in Quebec are therefore not intended to save money. On the contrary, retirees would emerge overall winners. In the first scenario, we would postpone the minimum age to 62 years and the maximum age to 72 years, by 2030. Let’s be very clear: retirees would not lose out. For the majority of Quebecers, it pays more to forgo their pension for a few years (even if it means disbursing their savings more quickly to live) in order to receive a higher pension for the rest of their lives. An annuity guaranteed by the State. Fully indexed. »
She continued writing : “Minister Girard is therefore right to present this project as a means of improving the financial security of future retirees, an alarming number of whom are at risk of lacking retirement savings, with life expectancy stretching. »
Impeccable passages without inaccuracies. So why did so many consulted groups oppose it? Partly because of this other finding mentioned by Mr.me Grammond. “Those who apply for their pension as soon as possible, while continuing to work, are making a bad financial decision by burning the candle at both ends. But it must be recognized that other workers cannot help claiming their pension at such a young age, because their job is too arduous and they have no savings. »
During my career as an actuary, I have often heard the proverb: “One in the hand is better than two in the other”. It means “better to opt for something that you can get immediately rather than something more valuable, but not sure to get later”.
With the postponement of the minimum age to 62, we are in the presence of a situation of the type “is one in the hand better than four in the worst? “.
In other words, it is extremely advantageous from a financial point of view to wait until age 62 to start receiving your pension. For what ? It is a question of longevity, that is to say that a large part of the population will live beyond 85 and even 90 years. In fact, one in four men and one in three women will reach the age of 93. Raising the minimum age to 62 is even more advantageous for women than for men.
Waiting until age 62 means receiving a 23% higher pension for at least 25 years. Instead of receiving $600 per month from age 60, it is rather $738 per month from age 62.
What does a fully indexed annuity mean in dollars? If inflation continues at a rate of 4% per year, that’s $168 more per month in five years for an amount that will be around $900 per month. In other words, the original difference of $138 is now $168. And this difference continues to grow with inflation. The numbers speak for themselves. Improved financial security.
It’s a think about it!
This proposal constitutes an advantageous financial solution for at least 90% of the people concerned.
Among those who apply for their pension at 60 and 61, at least 9 out of 10 people will come out on top. I would even say very winning.
All the groups consulted in the parliamentary committee recognized that it was advantageous to delay payment to age 62. This is the first side of the coin. Withdrawing a right is often perceived as a loss and not as a gain. This is the second side of the coin. Most of the groups consulted have chosen this perspective, even if it will continue to disadvantage a large number of Quebecers.
Having attended and actively participated in the consultations, I can say without hesitation that Minister Girard will have to show great political courage to put forward this bold proposal which is above all very beneficial for Quebecers. What is good for Quebec is surely good for the rest of Canada. Will Canada’s Finance Minister, Chrystia Freeland, have the courage to do the same for the Canada Pension Plan?