Édition du 12 April 2012

Strengths and weaknesses of the Québec retirement system

The Régie des rentes du Québec recently published a study entitled Évaluation du système québécois de sécurité financière à la retraite par rapport à celui d'autres pays industrialisés (Evaluation of the Québec system of financial security at retirement in relation to that of other industrialized countries; French only). The study showcases the strengths and weaknesses of the Québec retirement system in relation to the systems of Canada, Germany, the United States, France, Italy, Japan, the Netherlands, the United Kingdom and Sweden.

Strengths of the Québec system
In Québec, the risk of poverty for persons aged 65 and over is below the average for the countries studied, mainly because a minimum level of income is guaranteed by the Old Age Security (OAS) pension and the Guaranteed Income Supplement (GIS). In addition, for low-income workers, the rate at which income is replaced by public plans is higher than in the other countries.

In Canada, there is less income inequality in retirement, which is not the case in all the countries studied.

In comparing the average income of persons aged 65 and over to the average income of the population, the ratio for Québec is greater than that of six of the nine countries studied. Moreover, it is 4,5% higher than the overall ratio for all member countries of the Organisation for Economic Co-operation and Development (OECD).

On the whole, Canada stands out from other countries in terms of the increase in seniors' income in relation to that of the labour force. In this regard, Canada has gone from last place in the 1970s to first place 20 years later.

Even with this improvement, the overall cost of public plans, as a percentage of GDP, is one of the lowest in the world and the contribution rate one of the highest.

Weaknesses of the Québec system
It's no surprise that aging populations pose a sizable challenge for many countries. The situation is particularly worrying in Québec since the population is aging faster than in the countries studied.

In view of this situation, retirement obviously poses a series of problems. However, unlike most of the countries studied, Québec has not raised the normal age of retirement.

 

As mentioned above, in Québec the rate at which income is replaced by public plans is higher for low-income workers. The situation for workers with average or above-average earnings is different: the rate drops quickly and is below the average for OECD countries. These workers must therefore save to maintain their standard of living in retirement. However, the average savings rate of Quebeckers (2,4%) is lower than the rate for the other countries studied (6,6%).

To learn more, consult the Evaluation of the Québec system of financial security at retirement in relation to that of other industrialized countries (French only).