Retirement: a widening gap between Ottawa and Quebec

For some time now, many voices have been raised to demand some improvement in public pension benefits. Over the past summer, it was announced that a step would soon be taken.

RPC and RRQ

Canadian workers outside Quebec do not contribute to the Québec Pension Plan (QPP), but rather contribute to a plan very similar to the Canada Pension Plan (CPP). On June 20, 2016, in Vancouver, the federal government and eight provinces (excluding Manitoba and Quebec) reached an agreement in principle to improve the CPP. Manitoba agreed to sign this agreement later. The agreement would be implemented gradually over a period of 7 years from 1 st January 2019.

Overview of changes

The agreement would mainly lead to 3 amendments:

Increase in the maximum pensionable earnings (MGA), the wage on which the contribution is levied and the pension is based. The MPE for the year 2017 is $ 55,300 ($ 54,900 in 2016). The AGM projected in 2025 would increase from $ 72,500 (amount before amendments) to $ 82,700. This increase would occur in the years 2024 and 2025.

The replacement level of CPP income would eventually rise from 25% (which is also the QPP replacement rate) to 33%.

Employer and employee contributions would increase initially by 1% of eligible salary. This increase would be phased in over a period of 5 years from 1 st January 2019. Then a new additional contribution of 8% (total employee / employer) would be applicable to the income bracket between the proposed MPE ($ 72,500) And the new limit ($ 82,700).

To answer some critical set for low-income workers, the federal government is also committed to improving the tax benefit working income . Self-employed workers will be covered by this improvement and will pay double the contribution (as is already the case). Finally, these additional contributions to the CPP will not generate a pension adjustment (PA). They will therefore have no impact on the RRSP contribution room.

Harmonization of the Québec Pension Plan?

Although Quebec is not against the idea of ​​improving the CPP, Quebec Finance Minister Carlos Leitão has not signed the Vancouver agreement. Rather, it was in favor of a “modest, targeted and gradual” solution, including a form of exemption from additional contributions on earnings of less than $ 27,450 (50% of the current MPE). We do not yet know the details of potential changes to the QPP, but a consultation document on the future QPP just tabled: Consolidate Plan to strengthen intergenerational equity .

Under the Canada Pension Plan Act, an amendment to the Plan requires the concurrence of at least 7 provinces representing at least 2/3 of the country’s population. Since only Quebec has not approved the agreement, this threshold has already been reached.

Historically, the CPP and QPP were very similar. Proposals for changes to the CPP, whose adoption seems to be only a matter of time, mean that the two plans would become significantly different … except of course if Quebec decided to follow suit!

Martin Dupras, ASA, Pl. Fin., M. Fisc., ASC