Recently, we posted an Employer’s Guide for CPP Enhancement 2024, and our readers have asked for details on the QPP enhancements that are also underway. The Québec Pension Plan (QPP) is a cornerstone of financial security for workers in Québec, providing a compulsory public insurance plan for individuals aged 18 and above with an annual employment income exceeding $3,500. Employees whose province of employment is Québec are deducted QPP contributions instead of CPP.
As part of an ongoing effort to bolster the financial security of retirees, enhancements to the QPP are slated to take effect on January 1, 2024.
Table of Contents
Rate Increase for Higher Retirement Pensions
The rate at which retirement income is replaced will increase from 25% to 33.33%.
Increasing the rate of income replacement will contribute to higher retirement pensions. The increase is gradual and determined depending on the number of years of contribution to QPP after enhancements. This means that the current generation of workers entering the labour force will benefit most from the enhancements, more so than an individual who is close to retirement.
This adjustment is aimed at ensuring higher retirement pensions for beneficiaries, mirroring the enhancement seen in the Canada Pension Plan (CPP) aimed at a more secure and comfortable retirement.
Introduction of an Additional Plan
Since January 1, 2019, the QPP introduced an additional plan alongside the base plan. This new plan structure involves a gradual increase in the contribution rate from 2019 to 2023, akin to the CPP’s enhancement, leading to higher benefits for individuals during retirement or in cases of death or disability.
Extension of Maximum Age for Receiving Benefits
The threshold to commence the receipt of QPP benefits has been pushed from 70 to 72, aligning with the enhancements seen in CPP. This extension aims at providing an enhanced pension for those who choose to delay the start of their pension, with discussions ongoing regarding a further extension to age 75.
Optional Contributions Post Age 65
With the upcoming changes, QPP contributions will become optional for workers aged 65 and above who are still employed. This flexibility, inspired by similar provisions in the CPP, offers more control to individuals regarding their retirement planning.
Understanding the QPP Enhancement Calculation
We’re going to take a look at an example set of employees as provided by RRQ and see how the upcoming QPP changes will affect their retirement:
| Name | Year of birth | Year of retirement at age 65 | Annual pension (base plan) | Annual pension (additional plan) | Total amount of enhanced pension | % at which gross annual income of $73 900 is replaced |
| Charlotte | 1957 | 2022 | $14,925 | $211 | $15,136 | 20% |
| Paul | 1963 | 2028 | $14,925 | $1,268 | $16,193 | 22% |
| Anthony | 2000 | 2065 | $14,925 | $7,732 | $22,657 | 31% |
- Charlotte is taking advantage of the enhancement of the Plan prorated to the contributions she made to the additional plan from 2019 to 2021.
- Paul is taking advantage of the enhancement to the Plan, prorated to the contributions he made to the additional plan from 2019 to 2027.
- Anthony is taking full advantage of the enhancement to the plan, since he has contributed to the additional plan for at least 40 years and his earnings are equal to the eligible earnings cap.
Read more on this table at RRQ.
Enhanced Provisions for Specific Situations
The QPP is expanding its horizons to better recognize specific situations such as periods of disability, child-rearing, or caregiving. These enhanced provisions are aimed at providing more comprehensive coverage, ensuring individuals in such cases are not left in a lurch.
Adjustment for Financial Imbalance
An adjustment mechanism is being introduced in the additional QPP plan to tackle financial imbalances. This mechanism seeks to restore financial balance through contributions from workers, employers, and retirees, similar to the sustainability provisions seen in the CPP enhancement.
Improved Survivor Benefits
Drawing inspiration from the CPP, the QPP is also revisiting its survivor benefits. This revision is aimed at providing better support to the surviving spouses and children, ensuring they have a financial cushion to fall back on in the event of the contributor’s death.
Enhanced Disability Benefits
The disability benefits under the QPP are being revamped to provide better support to individuals who are unable to work due to a severe and prolonged disability. This enhancement reflects the CPP’s commitment to providing robust disability benefits.
The slated enhancements to the Québec Pension Plan are a significant stride towards fortifying the financial security for retirees in Québec. These augmentations, although gradual, are designed with a long-term vision, and are poised to substantially impact the retirement pensions, embodying a promise of a secure and comfortable retirement.
