Régie des rentes du Québec

Changes announced in the Québec budget speech in March 2011

In his 17 March 2011 budget, Mr. Raymond Bachand, Minister of Finance and Minister of Revenue, announced certain measures aimed at changing the Québec Pension Plan. The proposed changes, which will gradually come into effect over the next few years, will improve the Plan's funding and encourage experienced workers to continue working.

Beneficiaries who are already receiving a pension under the Plan will not be affected by the changes to benefits. Their pensions will continue to be paid and indexed each year.

The end result of the proposed changes is to restore the Plan's financial situation.

Change in the contribution rate

In 2012, the contribution rate increased by 0,15% to 10,05%. The rate applies to the portion of employment earnings between the basic exemption (3 500 $) and the maximum pensionable earnings (50 100 $ in 2012). The employee and the employer each pay half (5,025% each). Self-employed workers must pay the entire amount to Revenu Québec.

The contribution rate will gradually increase by 0,15% a year until it reaches 10,80% in 2017. As of 2018, an automatic mechanism will be implemented, allowing the contribution rate to be aligned continually with the Plan's steady-state rate.

Example

0,15% increase in the contribution rate in one year (effect in 2012)
Employment earnings Total contributions
(employee and employer)
Increase
Before the increase After the increase Employee Employer Total
15 000 $ 1 138,50 $ 1 155,75 $ 8,63 $ 8,63 $ 17,25 $
30 000 $ 2 623,50 $ 2 663,25 $ 19,88 $ 19,88 $ 39,75 $
51 100 $
(maximum pensionable earnings in 2012)
4 613,40 $ 4 683,30 $ 34,95 $ 34,95 $ 69,90 $

By increasing the contribution rate for the Québec Pension Plan, the Government aims to:

  • Strengthen the Plan's funding

    The Québec Pension Plan is a compulsory public insurance plan directly funded by contributions from workers and employers. All workers aged 18 and over contribute to the Plan once their annual employment earnings exceed 3 500 $. Contributions are used to pay benefits to beneficiaries of the Plan (1,6 million beneficiaries in 2010).
  • Maintain the reserve over the long term

    A reserve is created where amounts obtained through deducting contributions exceed the amounts paid to beneficiaries. The reserve can generate investment income that is added to the funding obtained through contributions. At 31 December 2010, the reserve was 33,3 billion $. Had the contribution rate remained the same, the reserve would have been depleted in 2039.
  • Maintain equity between current and future generations of contributors

    To have the same effect on plan funding, a greater increase would have been required if the increase in the contribution rate had been postponed. Waiting longer would have resulted in a proportionally greater effort on the part of workers and employers.

Changes to the actuarial adjustment factor for retirement pensions

The normal retirement age is set at age 65, but a contributor can be entitled to his or her retirement pension as of age 60. However, the amount of a retirement pension is reduced if a contributor applies before age 65. In calculating a retirement pension, a contributor's age is taken into account. Therefore, the pension amount is adjusted according to whether payment begins before or after a contributor's 65th birthday.

Before age 65

If a retirement pension under the Québec Pension Plan starts being paid before age 65, it is currently reduced by 0,5% for each month included between the time payment begins and age 65. As of 1 January 2014, the actuarial adjustment factor will vary proportionally to the amount of the pension. The following table presents the factors that will apply during the transition phase and beyond.


Year Minimum actuarial adjustment Maximum actuarial adjustment
2014 0,5% a month 0,53% a month
2015 0,5% a month 0,56% a month
2016 and beyond 0,5% a month 0,60% a month

The actuarial adjustment factor will remain at 0,5% for a person who receives a very low pension. It will then gradually increase to 0,6% for a person who receives a maximum pension.


Important!

A contributor who was born before 1 January 1954 will not be affected by the change.



Examples

Effect of the change in the actuarial adjustment factor before age 65
Average annual income Monthly pension
at age 65
Monthly pension at age 60
Current amount
(reduced by 30%)
Amount under the new measure - 2016
(reduced proportionally according to
amount of pension)
Effect
Note: these amounts take into account the parameters of the Québec Pension Plan for 2012.
15 000 $ 295 $ 207 $ 201 $ − 5 $
30 000 $ 591 $ 414 $ 392 $ − 21 $
50 100 $
(maximum pensionable earnings in 2012)
987 $ 691 $ 631 $ − 59 $

Effect of the increase in the actuarial adjustment factor on a pension at age 60 by year
Average annual income Current pension
at age 60
Annual reduction in the pension (in 2012 dollars)
2014 2015 2016
15 000 $ 2 481 $ − 19 $ − 38 $ − 64 $
20 000 $ 3 309 $ − 34 $ − 68 $ − 113 $
30 000 $ 4 963 $ − 76 $ − 153 $ − 255 $
40 000 $ 6 617 $ − 136 $ − 272 $ − 453 $
50 100 $
(maximum pensionable earnings in 2012)
8 288 $ − 237 $ − 426 $ − 710 $

After age 65

If a retirement pension starts being paid after age 65, the amount is currently increased by 0,5% for each month included between the age of 65 and the month in which the payment of the pension under the Québec Pension Plan begins, up until age 70. The rate will be increased to 0,7% a month as of 1 January 2013.

By making these changes with respect to the age at which a person retires, the Government wishes to:

  • encourage people age 60 and over to continue working;
  • better balance the length of a person's working life with his or her years of retirement.

For more information

Read the budget paper entitled A Stronger Retirement Income System, which is available on the Ministère des Finances' This link will open in a new window. Web site.

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