Retirement | The QPP in the era of celibacy

It’s beautiful, love is romantic, but for all sorts of reasons, the number of single people continues to grow. In the country, 15% of people live alone. The proportion is even higher in Quebec, where it reaches 19%, the national record. The demography has changed a lot, but the Quebec Pension Plan (QPP) has not adapted enough to it, deplores Sylvie, a 50-year-old single woman.

“As a person living alone, I cannot name a beneficiary for the QPP money that I have contributed to all my life. When I die, this amount will return to the system to promote the couple, this social state considered by law as superior, but for which the cost of living is much lower. »

Unlike Sylvie, married people and de facto spouses all have a default beneficiary: their better half, who will receive, with some exceptions, the surviving spouse’s pension.

The 50-year-old explains to me that she, too, would like to be able to provide some financial security to a loved one. She especially thinks of her brother, who is having a hard time. But the law does not allow it. “Our filial bond is inferior to the sacrosanct couple”, she denounces.

When they die, do single people experience some form of discrimination based on their marital status? The question deserves to be asked, especially in the context where the number of single-person households continues to climb.

Suppose Sylvie had the misfortune to die without a spouse two or three years after her retirement. The vast majority of his contributions would effectively remain in the plan for the benefit of other contributors, as a couple or not, it should be specified. Over the years, however, his sense of injustice should lessen, if not disappear. If she dies at age 90, the QPP will have paid her an indexed pension for decades.

Couples, for their part, can expect their lover to obtain an amount from the QPP. This is not automatic, since those who already receive the maximum pension are not entitled to anything. However, this situation remains extremely rare. In 2020, for example, only 2.8% of new beneficiaries received the maximum pension.

What you have to keep in mind is that the surviving spouse’s pension was created in 1966 to prevent women who lived at home from falling into poverty when their husband died. It was also called “the widow’s pension”. Times have changed and the scheme has adapted, first allowing men to benefit from the amount (1975). Common-law spouses were next eligible (1985), followed by same-sex spouses (1999).

But even today, the surviving spouse’s pension is an “insurance” that aims to financially protect people with financial dependence within a couple, says the RRQ. Moreover, the amount varies according to the age of the survivor, the amount of pension already received and the presence or absence of dependent children. If the idea was rather to give the heirs the contributions of the deceased, the profile of the widow or widower would have no impact on the monthly payment.

Whether or not we agree with the objective of this “annuity-insurance” which obviously entails costs for all contributors, there is no doubt reason to ask whether it is still relevant when the labor market welcomes everyone.

Other pension plans in which risks are pooled (defined benefit, target benefit, salary-funded) already take into account the varied needs of members and attempt to reduce inequities.

When a joint and survivor pension of 60% is offered, for example, “several plans provide that it will be financed by a reduction in the participant’s pension”, reports Simon Campagnoli, actuary and vice-president of the firm SAI, specialist in retirement plans. Thus, the other participants, including singles, are not disadvantaged. But it’s not systematic.

Many plans also provide a “10 year guarantee” which does not distinguish between single people and people in a couple. The plan pays chosen heirs the promised annuity for up to a decade after retirement. Suppose you retire at age 65, receive an annual pension of $20,000, and die at age 70. Your beneficiary will receive the equivalent of five years of pension, or $100,000. A single person can generally waive this guarantee in order to obtain a higher pension.

In the case of individual pension plans (defined contribution, VRSP, group RRSP), the marital status does not change the amount held in the account and available to the heirs. However, the spouse benefits from a major tax advantage: the amount received will not be subject to tax.

Sylvie contributes precisely to this type of plan with her employer… nothing to appease her feeling of unfairness.

Nobody talked about single people during the most recent public consultations on the QPP, last winter. But nothing prevents the subject from being on the agenda next time, especially if 19% of the population are calling for it.