2023-2024 Québec budget: Changes to the Québec Pension Plan (QPP) 

March 22, 2023

Canada, Toronto

On March 21, 2023, Eric Girard, Québec’s Minister of Finance, released the 2023-2024 Québec budget, titled A Committed Québec. This budget comes at a time of economic uncertainty, risk of recession and high inflation. It includes a number of measures related to the Québec Pension Plan (QPP), whose main objective is to encourage experienced workers to stay in the workforce longer and ensure the financial security of Quebecers in retirement.

Mercer participated in the work of the Committee on Public Finance of Québec regarding the QPP in February. We are pleased to note that the vast majority of the measures proposed in the budget documents are consistent with Mercer’s position in our brief (available in French only) and in our intervention at the Committee. Among other things, we note that:

• The changes made allow keeping a security margin to minimize the likelihood that the QPP contribution will have to be increased in the future. In this regard, the QPP contribution rate for workers and employers will remain the same following the changes announced.

• The earliest age to start receiving QPP benefits remains age 60, without further increases in penalties for drawing the pension early. We are pleased that Quebecers can maintain the existing flexibility while being encouraged, through improved communication, to defer their pension if they can.

The proposed changes to the QPP are as follows and will apply as of January 1, 2024:

• To help workers improve their financial security, the maximum age to start receiving QPP benefits will be raised from 70 to 72. This measure will allow people who can delay the start of their pension to receive an enhanced QPP pension. Delaying the start of the pension could be a good way for workers to manage retirement risks: investment, longevity and inflation. Deferring the pension may be beneficial for workers who continue to work in later life or for retirees who can use their retirement savings to get short-term income (knowing that the QPP pension they will receive later will be enhanced). We believe this extension of the maximum age from 70 to 72 could be just a first step that will eventually raise the age to 75. However, the enhancement of the pension at 0.7% per month after age 70 should be increased to encourage deferral.

• As is the case with the Canada Pension Plan (CPP), QPP contributions will become optional as of age 65 for workers who collect QPP benefits while continuing to work. Workers who continue contributing will keep accumulating pension credits and their employer will also have to contribute to the QPP. However, workers who stop contributing will also stop accumulating pension credits, and their employers may stop their contributions. Employers will need to adopt processes to manage the choices of their employees over the age of 65, as is already the case elsewhere in Canada.

• As with the CPP, the reduced working time after age 65 will no longer affect the average earnings used to calculate the QPP pension. This measure will allow more experienced workers to remain employed, often part-time, and to defer their QPP pension during a transition period to retirement, with no negative impact on the QPP pension.

• Lastly, QPP contributions for employees and employers will cease at the end of the year in which the employee turns age 72.

We also note that the Québec government undertakes various initiatives on the QPP:

• It is giving Retraite Québec the mandate of better explaining to workers the benefits of deferring the start of the QPP pension.

• It will begin work to better recognize specific situations under the QPP, such as periods of disability, caring for a child, or providing assistance as a caregiver.

• It will specify the adjustment mechanism applicable to the QPP additional plan in the event of financial imbalance. The goal will be to have workers, employers and retirees contribute to restoring the financial balance of the additional plan.

• It will expand Retraite Québec’s role by making it responsible for conducting research on the financial situation of retirees and the retirement system in general.

We support these changes and initiatives and are optimistic that they will be well received by Quebecers who will be offered a more inclusive and flexible QPP. However, we would like to see an automatic adjustment mechanism that provides for the contribution of workers, employers and retirees to also eventually apply to the QPP base plan.

Our consultants are available to discuss the impact of these changes on your organization and on your retirement and savings plans. Increased flexibility in the QPP will require workers to make choices. We therefore encourage organizations to communicate to employees how the QPP can be used to promote retention, better manage retirement risks, and how it can coordinate with employer-sponsored plans.