Québec Pension Plan

The Québec Pension Plan (QPP) replaces the Canada Pension Plan (CPP) in the Province of Quebec. Like the CPP, the QPP provides contributors and their families with retirement, disability, survivor, death and children’s benefits. It is an example of a defined benefit pension plan. The QPP is administered by Retraite Québec, formerly the Régie des rentes du Québec. Assets of the QPP are managed by the Caisse de dépôt et placement du Québec.

Contributions

Contributions to the QPP are compulsory for workers over the age of 18 whose annual employment income is greater than $3500, the basic exemption. Contributions are made by workers and employers up to yearly maximum pensionable earnings (YMPE) of $68 500 in 2024. In 2024, the contributions are 10.8% of salary between the basic exemption and the YMPE, for the base plan. There is also a 2% contribution for the "additional plan", and this rate is set to increase progressively until 2025. In summary, between the basic exemption and the YMPE, the total current contribution rate is 12.8%.

As part of the additional plan (or "enhancement"), as of 2024, new contributions with a total rate of 8% apply to earnings between the YMPE and a second ceiling ("additional maximum annual pensionable earnings", YAMPE) which will be 107% of the YMPE in 2024 and 114% of the YMPE in 2025.

The employee and the employer each pay half of those contributions. Self-employed workers pay the full contribution.

Historical pensionable earnings and contributions are available from Retraite Québec.

Retirement pension

General information

The base plan aims to replace 25% of the earnings on which the worker contributed, assuming retirement at age 65. The additional plan aims to bring this up to 33.33%, but the full effects of the additional plan will only be felt in 2065. For 2024, the maximum pension at age 65 is $1364.60 per month.

To get the maximum QPP pension, a worker must have earned the YMPE or more for 40 years between age 18 and age 65, so most people do not get the maximum pension. In 2020 for example, the average monthly pension of new pensioneers was $547, less than half of the maximum of $1177 for retirement at age 65 that applied at the time. Get your Statement of Participation online to see an estimate of your projected monthly pension amount.

The pension is taxable and fully indexed for the cost of living each January.

Applying for benefits

Workers must apply to receive their pension, online or by regular mail. Workers who have contributed to both the CPP and the QPP must apply for the QPP if they live in Quebec or for the CPP if they live elsewhere in Canada.

Pension sharing between spouses

QPP allows retirement pension sharing between spouses. Depending on the length of the union, each spouse could now receive the same amount, i.e. half the previous total for the couple. This generally reduces total income tax owning for the couple. A separate application form must be filled and returned by mail.

When to claim it

The "normal" age to claim your QPP pension is 65, although more than half of eligible contributors start collecting at 60, the earliest possible age. Retirement earlier or later than 65 will decrease or increase the monthly pension, respectively. Benefits do not increase beyond age 72 so there is no reason to wait later before claiming QPP. A table showing the maximum monthly pension amounts, as a function of retirement age, is available from Retraite Québec.

Claiming QPP early

If you need the income, or if your life expectancy is low, you may be a candidate for taking government pensions as early as possible. Early retirees are also possible candidates because this reduces the number of "zero work income" years in their record. But each situation is different and you are encouraged to simulate different scenarios using the information below.

Delaying QPP

Only 1-2% of QPP contributors wait after age 65 to claim their pension. Yet delaying the start of your CPP/QPP pension, and perhaps Old Age Security (OAS), has the effect of significantly increasing the yearly benefits payable. These benefits are indexed to the cost of living and are guaranteed to last until death. Therefore, by drawing down other sources of income sooner, to make up for the shortfall created by the delay in CPP/QPP and/or OAS, the retiree is making a choice equivalent to the purchase of an indexed life annuity. This decreases longevity risk, and may allow the retiree to enjoy a greater total income in early years.

Good candidates for this strategy will have no bequest motives, no cash-flow issues, and will be in above-average health. Delaying QPP is further discussed under Delaying government pensions and benefits.

Changes for 2024

The following changes to QPP came into effect on January 1, 2024:

• Allow workers aged 65 and over who are already receiving their retirement pension to stop contributing to the QPP
• Protect the pension amount after age 65 thanks to a new calculation
• Extend the maximum age at which a person can begin receiving a pension under the QPP to age 72

DIY pension calculations

Your Statement of Participation includes an estimation of your monthly QPP pension, using today’s dollars, under four scenarios:

1. Stop working now and claim QPP at age 60
2. Stop working now but claim QPP at 65
3. Continue to work until 60 and then claim QPP immediately
4. Continue to work until 65 and then claim QPP immediately

These are useful starting points but you may wish to evaluate more scenarios, such as other retirement ages, or not claiming QPP immediately upon retirement. This can be done with a spreadsheet as explained below. If you can successfully arrive at the same monthly pension numbers than scenarios 1 and 2 above, your spreadsheet is probably correct and can be used to estimate your pension under any scenario.

First, obtain your Statement of Participation. Then, see Calculation of the retirement pension under the Québec Pension Plan for a detailed step-by-step explanation of the official method for calculating the QPP pension.

The principles are as follows:

• The contributory period starts the month after you turn 18.
• The contributory period ends the month before your QPP pension starts, the month during which you turn 70 (although see "Changes for 2024" above), or when you die.
• You can exclude 15% of these months when your earnings were the lowest, so for example you keep the 479 best months out of 564 for retirement at 65 and the best 428.4 months out of 504 for retirement at 60.
• You don’t need to know your employment details month by month, as will become clear when studying the example provided by Retraite Québec.
• The calculation will produce a monthly pension corresponding to 25% of your average adjusted monthly earnings for the 85% best months. This is your monthly pension if you claim QPP at age 65.
• The amount must be adjusted down by 0.5%-0.6% per month if you claim QPP before 65, and adjusted up by 0.7% per month if you claim QPP after 65.
• Starting in 2016, the formula for the exact monthly penalty for retirement before age 65 is: 0.5% + 0.1% * (monthly_pension_before_penalty / maximum_monthly_pension)

Other provisions

Although not mentioned in the step-by-step explanation from Retraite Québec linked above, there are also drop-out provisions for child rearing, receiving disability pensions, and receiving unreduced replacement indemnities from the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST). These provisions must be applied before the general drop-out of 15%. The child-rearing provision reads as follows: "any months for which you received family benefits paid by the Québec government or the Canadian government for a child under 7 or the months for which you were eligible for such benefits but none were payable".

QPP Calculator

See the CPP and QPP calculator.

Other QPP benefits

QPP offers additional benefits and pensions when contributors become disable or die:

• Disability pension
• Pension for a disabled contributor's child
• Death benefit ($2500)
• Surviving spouse's pension
• Ophan's pension

Surviving spouse's pension

The surviving spouse's pension can be a significant component of financial planning, for a couple.

If a deceased contributor has contributed to QPP long enough, their spouse will get a surviving spouse's pension. "Long enough" is defined here and the term "spouse" in a QPP context is defined here.

The amount paid depends on:

• the contributions of the deceased contributor to QPP (and CPP);
• the deceased's retirement pension supplement, if he or she was receiving one;
• the survivor's age;
• whether the survivor is supporting dependent children of the deceased person;
• whether the survivor is deemed to be disabled by Retraite Québec;
• whether the survivor is already receiving a retirement or a disability pension under the QPP/CPP, if applicable

The amount currently payable to your spouse if you pass is shown on your Statement of Participation, available in "My Account". Maximum amounts as a function of age are shown in .

The surviving spouse's pension calculations are as follows for the base plan, if the survivor under the age of 65 is not getting other QPP pensions:

• A fixed portion, plus
• 37.5% of the accrued retirement pension of the deceased

where the fixed portion varies with age as follows:

• for a surviving spouse under age 45, the monthly amount was $134.37 in 2022;
• if they cared for a child of the deceased, the monthly amount was $487.12 in 2022;
• for a surviving spouse between the ages of 45 and 64, the monthly amount was $524.61 in 2022.

(The fixed portion goes up every year as a function of the Pension Index.)

Starting at age 65, the survivor pension becomes 60% of the accrued retirement pension of the deceased, but might be reduced if the survivor is also claiming their retirement pension. Specifically, Retraite Québec writes that "As of age 65, if you are receiving the maximum retirement (pension) granted for a year, your surviving spouse's pension will be $0 for the base plan".

The additional plan also has survivor benefits, currently a minor fraction of the total survivor pension.

Financial situation of the Plan

By design, the QPP is only partly funded. This means that outflows are paid mostly from new contributions, but there is also a reserve, the QPP fund. If new contributions exceed outflows like is currently the case, the extra cash is added to the reserve. When, in the future, outflows will exceed new contributions due to population aging, the shortfall will be covered by investment income from the reserve. The steady-state or equilibrium QPP contribution rate is such that the ratio of the reserve to annual outflows remains constant on a long-term basis.

As of 31 December 2021, the QPP Fund assets were $103 billion dollars. The latest actuarial valuation, as of the same date, shows that over the next 50 years, new contributions plus investment income will exceed the costs of the regime, and that the steady-state contribution rate is 10.54% for base QPP, compared with the 10.80% legislated rate. The additional QPP is also sustainable. The projections are based on average nominal investment returns of 6.1% for base QPP and 5.8% for additional QPP over the next 50 years.

QPP has a higher contribution rate than CPP because of unfavorable demographics and lower salaries in Québec relative to the rest of Canada.

See also

• Canada Pension Plan
• Old Age Security
• Guaranteed Income Supplement

External links

• Retraite Québec - Québec Pension Plan - official site
• Retraite Québec - Québec Pension Plan – Forms
• Quand débuter ses prestations publiques de retraite : Les avantages de la flexibilité, Chaire en fiscalité et en finances publiques, 2023