PHOTO BERNARD BRAULT, PRESS ARCHIVES
In all cases, the pension at age 70 will be increased compared to that at age 65, says Retraite Québec.
Last week, I spoke to you about the customer service department of Retraite Québec, which is not always able to properly explain to seniors the figures contained in its communications. The annuity forecasts provided in Heading for retirement, above all, raise many questions.
“These documents must be transformed in order to facilitate their understanding both for future retirees and for employees of Retraite Québec. As I myself am close to retirement and a government employee, I receive these documents annually. Although my husband works in finance and I am a school principal, we are unable to agree on a common understanding, ”one reader wrote to me.
The most misunderstood figure, the one that even arouses the most suspicion, seems to me to be this famous 42%. This is the pension bonus to which we are entitled if we claim our pension at age 70 rather than 65, according to Retraite Québec.
Some don’t believe it at all, and even accuse the media and financial planners of bluntly repeating an inaccurate number. In their Heading for retirement, they see a smaller bonus, 23% or 28%, for example.
Obviously, the expected amount of pension over time – at age 65, 67 or 70 – is crucial in making an informed decision. It is therefore important to have the right information on hand, to be able to understand it or have it explained by a reliable source.
In order to clarify this question once and for all, I sent a list of questions to Retraite Québec, while insisting on the importance of popularizing the answers. So here is the result.
What proportion of Quebecers wait at age 70 to apply for their pension?
About 1%.
How many of them get the promised 42% bonus?
Statistics for the last five years show that approximately 70% of Quebecers who wait until 70 to apply for their retirement pension obtain an increase greater than or equal to 42%.
Are there any Quebecers whose personalized pension figures at age 70 provided in Heading for retirement correspond to the increase of 42%?
Yes. These are people who have generally contributed to the QPP throughout the years of their career.
What are the conditions for being entitled to an enhanced pension of 42% at age 70? Should we, for example, continue to work for the five years and / or have a minimum of years of contributions?
There are no specific conditions for being entitled to an enhanced pension of 42% at age 70. It is not necessary to work from 65 to 70 years old. The pension adjustment factor of 42% is granted to all those who start drawing their pension at age 70. There is no number of years of contribution required. Years with zero earnings between 65 and 70 could be considered in the career history, so that the final resulting increase in the amount of annuity payable would be less than 42%. However, it is important to mention that in all cases, the pension at age 70 will be increased compared to that at age 65.
If there is no condition to get a 42% increase, why is it not always reflected in the custom numbers provided in Heading for retirement ?
Heading for retirement takes a cautious approach so that the amount entered represents the minimum of what the person would receive if they postpone their pension to age 70. Indeed, Heading for retirement assumes that the person does not contribute during the postponement of the retirement pension. Also, the figures presented are in today’s dollars and do not take into account inflation and future wage growth.
I have the impression that some readers will have jumped on reading the last two answers.
Especially the mathematicians who know the way Quebec pensions are calculated or who are able to decipher the method presented on its website.
Even if it is technically correct that a 42% bonus is offered, you should know that this percentage will apply, in many cases, to a lower average eligible income.
Let’s try to see it clearly. A person who stops working at 65 and waits 70 years to claim his pension adds five years of eligible earnings to $ 0 to his file. These five years are usually not without consequences, unless you started earning good wages at a very young age.
Because to make its pension calculations, Retraite Quebec withdraws 15% of the worst months of work in terms of earnings during the contribution period. Important reminder: whether you are working or not, the contribution period to the Quebec Pension Plan begins the month following our 18the anniversary and ends on the day you start to receive your pension. At 65, we therefore have a contribution period of 47 years. At 70, she will be 52.
“The condition is there. The years during which you defer your pension must not cause you to exceed your 15%, sums up Jean Lamontagne, who is a CFA, actuary and financial planner by training, but also vice-president of the Rivemont investment firm. The contribution period has a significant impact! To be entitled to the full 42% bonus at age 70, a participant must have fully contributed to the QPP for 44.2 years. ”
Finally, it is explained quite easily. Mystery solved!