An Interesting Idea from Quebec’s QPP

By Ryan Goldsman, CFP®, PAIP®

            Just like the federal government, the province of Quebec recently tabled its budget which contained at least one very interesting aspect. Just like the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP) provides retirement benefits which can be started at any time between the ages of 60 and 70, with age 65 being the normal retirement date.

Those who begin receiving benefit before age 65 will see a reduction of 0.6% for each month they begin benefits before age 65, and those who delay them will have an increase of 0.7% for each month past age 65.

The new development in Quebec, is that benefits can be delayed by an additional two years for those still working, or those with a longer life expectancy.

The increase which previously maxed out at 42% (calculated as 0.7% x 5 years x 12 months) will now max out at 58.8% (calculated as 0.7% x 7 years x 12 months).

With a current monthly benefit of $1,026.96 for those aged 65, the increase could lead to an amount as high as $1,630.81 for those who are willing to remain patient.

On the other side of the coin, each retiree must live long enough to benefit from the higher benefit amount. Although each year that QPP (or CPP) is deferred translates to a higher benefit amount, it also translates to one fewer year of benefits. The “crossover” ages for CPP can be found here.

If the federal government were to make the same alteration to the CPP, then the new crossover ages (meaning how long one would have to live to benefit from deferring their benefits until age 71 or 72) would be 87 (when deferring benefits one additional year), and 89 when deferring benefits until age 72.

At the current time, this proposal has been made for the QPP only, and not for the CPP. Should it be introduced at a later time however, we’ll be a little better prepared.