Quebecers to pay more, get more from QPP, starting in 2019
Finance Minister Carlos Leitão tables bill to ‘mirror’ increases in CPP
Quebecers will see their contributions to the province's public pension plan start to rise in 2019, but with that increase will come an increase in their pension payouts when they retire.
Bill 149, tabled by Finance Minister Carlos Leitão Thursday, sets the stage for a major shift in the size and funding of the Quebec Pension Plan (QPP).
"In 20 or 30 years, if we did nothing, we could have a serious problem of insufficient retirement savings," Leitão said.
Boost in payments, benefits
The proposed legislation requires both workers and employers to gradually pay more into the plan starting in 2019, amounting to a one per cent increase in contributions for both workers and employers by 2025.
Every extra dollar paid into the pension plan will lead to an average sixfold increase in benefits, the finance minister said.
For example, Quebecers earning $40,000 a year will pay $365 more a year into their pensions by 2025, for a total of $1,971 annually.
Upon retirement, those workers will get $3,320 more annually, for a yearly public pension of $13,320 per year.
Bill 149 also raises the limit on maximum pensionable earnings. The cap on earnings, now set at $55,300, will rise to $63,000 by 2025.
Aims to 'preserve fairness between generations'
Those who retire before 2019 will not benefit from the increase in pension benefits, Leitão said.
"While we ensure better funding for the regime, the increases will be paid for by the people who will benefit from them," he said.
"That will preserve fairness between the generations."
The changes are designed to mirror enhancements to the Canadian Pension Plan (CPP), which passed into law last December. CPP benefits Canadians outside Quebec.
Leitão said it would have been difficult for Quebec not to follow suit.
With the harmonization of the two plans, people will be able to work in Quebec, move to Ontario and come back, all while maintaining the same pension coverage.
"A lot of companies have workers in Quebec and elsewhere in Canada, so [otherwise] it would have been very, very complicated," Leitão said.
There will also be corresponding increases in disability and surviving spouse's pensions.
Leitão said he expects people who make less than $25,000 a year to see increases in their pension contributions largely offset by the federal working income tax benefit.
However, he noted he is concerned about the increased cost of contributions to small businesses. He said the next provincial budget will look at ways to lessen that impact.
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