Enhancement of the Québec Pension Plan
The enhancement of the Québec Pension Plan introduces an
additional plan. Since 1 January 2019, the Québec Pension Plan comprises 2 plans:
-
the base plan, that is, the plan that was in place before the enhancement of the Québec Pension Plan and to which employees and employers each contribute 5.4% for the portion of earnings between $3500 (the basic exemption) and the maximum pensionable earnings (MPE).
-
the additional plan, that is, the plan to which additional contributions are paid by employees and employers according to a rate that will gradually increase from 2019 to 2023. In addition, as of 2024, new contributions will be added to the portion of earnings between the maximum pensionable earnings (MPE) and the new eligible earnings cap on which contributions are made, which will be 107% of the
MPE as of 2024 and 114% of the
MPE as of 2025.
Note that
Contributions to the Québec Pension Plan are divided equally between employees and employers. Self-employed workers pay the entire contribution.
Individuals who contribute to the additional plan will gradually see higher benefits in retirement, or in the event of death or disability.
Advantages for future retirees
The additional plan will provide future retirees with the following advantages:
-
The rate at which
income is replaced will be higher.
The rate will increase from 25% to 33.33%. It will contribute to higher retirement pensions. Since the increase is gradual and determined depending on the number of years of contribution to the enhanced part of the Plan, the generation of employees entering the labour market will benefit from the most significant increase in their retirement pension, whereas employees who will retire in the coming years will benefit from an increase in their pension prorated to their number of years of contribution to the additional plan.
-
The eligible earnings cap will be increased.
The cap will increase for 2 years, in 2024 and 2025, until it reaches 114% of the maximum pensionable earnings (MPE). The new cap will allow individuals whose salary exceeds the
MPE to contribute more and receive benefits prorated to their contributions so that they can also benefit from the 33.33% income replacement rate.
A significant increase in the amount of your retirement pension
The enhancement of the Québec Pension Plan will be carried out gradually. Specifically, additional benefits will be based on the number of years of contribution as of 2019. The full effect of the changes on benefits will be achieved in roughly 40 years.
This means that young employees will benefit from the most significant increase in their retirement pension, whereas older employees will benefit from a partial increase in their pension based on their years of contribution to the enhanced part of the Plan.
In 2022 dollars, the current maximum retirement pension of the base plan under the Québec Pension Plan is $14 925 for a 65-year-old retiree whose income was $73 900. Further to the implementation of the additional plan, the retirement pension will gradually increase to $22 657 in 40 years, which is an increase of more than 52%.
The following examples show that, based on your gross annual earnings and the number of years of contributions to the additional plan, the amount you will receive under the Québec Pension Plan, if you retire at age 65, will be increased.
| Name | Year of birth |
Year of retirement at age 65 |
Annual pensionSee the Note 1
(base plan) |
Annual pensionSee the Note 1
(additional plan) |
Total annual amount of enhanced pension |
% at which gross annual income of $40 000 is replaced |
|---|
| Alice | 1957 | 2022 | $9199 | $130 | $9329 |
23% |
| Charles | 1963 | 2028 | $9199 | $590 | $9789 |
24% |
| William | 2000 | 2065 | $9199 | $3065 | $12 264 |
31% |
- Maximum retirement pension, taking into consideration that the employment earnings are less than the
MPE ($64 900 in 2022 dollars) and depending on the number of years of contributions.
- Alice is taking advantage of the enhancement of the Plan prorated to the contributions she made to the additional plan from 2019 to 2021.
- Charles is taking advantage of the enhancement to the Québec Pension Plan, prorated to the contributions he made to the additional plan from 2019 to 2027.
- William is taking full advantage of the enhancement, proportionally to the contributions he has made to the additional plan for at least 40 years.
As a result of the enhanced plan, William's gross annual income is replaced at a rate of
31%. In addition, the retirement benefits he received have increased by more than 33% from $9199 to $12 264 (an increase of $3065).
| Name | Year of birth |
Year of retirement at age 65 |
Annual pensionSee the Note 1
(base plan) |
Annual pensionSee the Note 2
(additional plan) |
Total annual 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 | $1268 | $16 193 |
22% |
| Anthony | 2000 | 2065 | $14 925 | $7732 | $22 657 |
31% |
- Maximum retirement pension, for employment earnings equal to or greater than the
MPE.
- Maximum retirement pension, for employment earnings equal to or greater than 114% of the
MPE and depending on the number of years of contribution.
- 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.
As a result of the enhanced plan, Anthony's gross annual income is replaced at a rate of 31%. In addition, the retirement benefits he received
have increased by 52% from $14 925 to $22 657 (an increase of $7 732).