Numbering 1.3 million, the participants and beneficiaries of the largest pension plan in Quebec, the RREGOP (Retirement plan for personnel employed by the government and public bodies), feel exploited by their employer, the government of Quebec.
However, retirees and employees of the public service and the parapublic service of Quebec benefit from the “Mercedes” of retirement plans, that is to say a defined benefit plan, which plan pays them or will pay them a annuity determined and guaranteed based on their years of service and not based on the mood of the financial markets.
Benefiting from such a defined benefit pension plan is clearly advantageous, compared to the mass of private sector workers who must be content to contribute to a defined contribution pension plan or to a simple RRSP. Which registered retirement plans are directly dependent on the great variation in the performance of investments made over the years. It is impossible to determine in advance whether the amounts accumulated will be high enough to provide an attractive retirement income.
Why are these 1,300,000 state employees and ex-employees complaining about their RREGOP pension plan? Why do many of them say they are mistreated or downright exploited by the government?
SUB-INDEXING
Because their RREGOP, as advantageous as it may be, does not offer them a pension fully indexed to the cost of living, that is to say according to the rate of increase of the pension index (TAIR). And as a result, the purchasing power of state providers erodes over the years of retirement.
Concretely, here is how the indexation of the RREGOP pension works, from 1er January of each year.
- The part of the pension relating to years of service completed before 1er July 1982: it is fully indexed.
- The part of the pension corresponding to the years of service completed from 1er July 1982 to December 31, 1999: it is indexed according to the TAIR minus 3%.
- The part of the pension relating to the years of service completed since 1er January 2000: it is indexed at 50% of the TAIR or TAIR minus 3%, depending on the most advantageous calculation.
How did this under-indexation of pensions paid to state pensioners materialize?
The author of the file “Pension plans and the question of the indexation of annuities: the case of RREGOP”, Riel Michaud-Beaudry of the Retirement Observatory, calculated that RREGOP annuitants suffered a reduction in purchasing power of 17.5% between 2002 and 2021.
Given the high inflation that hit in 2022 and 2023, we agree that this reduction in power has necessarily accelerated.
In his study, Michaud-Beaudry also came to the conclusion that “the RREGOP indexing formula is one of the least generous among its equivalents in other Canadian provinces.”
HISTORICAL REVIEW
It was under the former PQ government of René Lévesque that the indexation formula and the sharing of responsibility for financing RREGOP were initially revised, in 1982, to the disadvantage of state employees, and this, due to the economic and budgetary crisis which raged at the beginning of the 1980s.
That said, you should still know that pension plans that offer full indexation are very rare in Quebec.
Fortunately, the old age security pension and the QPP pension are fully indexed. We console ourselves as best we can!