This text is part of the special Personal Finance section
The Quebec Pension Plan (QPP) continues its modernization by introducing some changes to its operation. These changes came into force on 1er January 2024.
The first change is part of the enhancement of the QPP initiated five years ago. Remember that before 2019, the replacement rate for work income was 25%. The current improvement aims to bring this replacement rate to 33%.
“Before 2019, the contribution rate was 5.4%, underlines Philippe Guèvremont, chief actuary at the RRQ, and after 2019, we added an additional contribution of 1 point, which brings the current rate to 6.4%. . » And as the employer is required by law to pay the same amount as the employee, the total contribution rate is therefore 12.80%. Note that this contribution rate applies to the contributor’s gross salary for the portion between $3,500 and $68,500.
“Since 1er January, a new contribution of 4% is deducted from the portion of the salary between $68,500 and $73,200, explains Philippe Guèvremont. However, the maximum annual contribution for this portion is set at $188 per year. »
For workers aged 65 and over
The other changes made to the QPP concern workers aged 65 and over. First of all, it is now possible to receive your pension at age 65 and continue to work but choose to no longer pay contributions to the QPP. In addition, the maximum age for applying for a pension increases from 70 to 72, which offers two more years of possible contributions. The contribution stops automatically as soon as you reach 72 years of age.
The latest modification is aimed at workers aged 65 and over who are still participating in the scheme and who continue to work, but at a lower salary than what they earned before age 65, for example, by choosing to work part-time. This lower salary will not lower the average career earnings used to calculate the pension. “In other words,” explains Philippe Guèvremont, “the pension that the person will receive can never be less than that which they would have received at 65 years old. »
“These latest changes were put in place,” emphasizes Shanie Lévesque-Baker, public relations officer and spokesperson for the RRQ, “in order to offer more flexibility and flexibility to older workers. »
Pension postponement
It is possible to receive the QPP pension from the age of 60, but in such a case, the pension paid will be lower than that which one would have at 65. However, if you wait after age 65, the pension will be increased by 8.4% for each year of deferral.
Let’s take, for example, the figures for the 2024 financial year. A 65-year-old person who applies for their pension will be entitled to a maximum pension of $1,364.60 per month. On the other hand, if this person is 60 years old, this maximum pension drops to $873.34 per month. On the other hand, if this person is 72 years old, the maximum pension increases to $2,166.98 per month. “As a general rule,” emphasizes Shanie Lévesque-Baker, “deferring annuity is always profitable. It’s not always possible, I agree, but when you can postpone taking the pension, you come out ahead. »
Effect on financial planning
Can the QPP enhancement influence the financial planning of a person, who might be less encouraged to contribute to an RRSP or TFSA? “I think not,” says Fabien Major, financial planner at Assante Wealth Management, “and it’s not advice I would give to a client. You can have the best possible financial planning, but it is never safe from the vagaries of life, such as illness, for example. In such a case, the QPP is of no help and holding liquidity in a TFSA or RRSP can then be a lifeline. »
The changes to the RRQ in brief
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