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Public pensions: How much will you be entitled to?

The public pension system is a key component of retirement planning. Even so, this social safety net is poorly understood by many and may prove to be insufficient. 


If you live to age 95, your retirement could last 30 to 35 years. Maintaining your standard of living during this period will require various sources of income. Quebec workers have a significant social safety net, thanks to two public pensions: the Quebec Pension Plan (QPP) and the Old Age Security (OAS) pension. To maximize your retirement income, it’s important to understand how they work.

Old Age Security (OAS) pension

The OAS is a public pension administered by the Government of Canada and available to all Canadian residents at age 651. This federal indexed benefit was $691 a month for the first quarter of 2023, or $8,2922 a year . This amount increases by 10% at age 75.
It may be wise to delay the payment of your benefits until age 70. For every month of deferral, the benefit increases by 0.6%3. If you postpone your application until age 70, your annual base amount could be $11,277 for 2023. To optimize your pensions, however, you must ensure your income does not exceed $86,912 (2023). For any income above this threshold, the OAS pension is reduced by 0.15%. The threshold should be taken into account if you plan to sell assets or will have earned income between the ages of 65 and 70.

Quebec Pension Plan (QPP)

The QPP is a public plan administered by the Government of Quebec. Unlike the OAS pension, the QPP is contributory. The benefits you receive are linked directly to the amounts contributed during your lifetime.

The contributions are mandatory and are shared with the employer. For employees, they are deducted at source. With each paycheque, the worker and the employer each contribute 6.4% of the maximum pensionable earnings (MPE), which are $66,600 in 2023. Self-employed workers must pay both parts of the contribution, for a total of 12.8%. In both cases, no contribution is payable on income exceeding the MPE.

The purpose of the QPP is to provide indexed income replacement until your death, with the maximum being 25 to 33% of the MPE, depending on your year of birth. The amount paid out depends on two factors: the contributions made during your lifetime and the age at which you start collecting the QPP.

Very few people receive the maximum QPP. To collect the maximum, you must contribute the maximum allowed, and, therefore, have an income that exceeds the MPE for almost your entire career. As a rule, even without qualifying for the maximum that can be collected, depending on your year of birth, your pension should be worth about 25 to 33% of the average monthly employment income earned during 85% of your best months of income4. Each month of low income can, therefore, have a negative impact on the QPP amount to which you will be entitled.

Age at which you start receiving the QPP
You can start receiving the QPP at age 60 but you can also postpone it until age 70. You should note that it will be reduced by 0.5% to 0.6% for every month before your 65th birthday if you start receiving it early. This scenario could reduce your pension by 36%. Conversely, your pension will increase by 0.7% for each month of deferral until age 70. This scenario allows you to increase your pension by 42%.

If the pension is taken at age 65 in 2023, the annual maximum that can be collected is $15,678.84.

QPP enhancement in progress

Will you be entitled to a maximum of 25% or 33% of the MPE? It depends on your year of birth. Since 2019, significant changes have been made to the QPP to increase the amount of the pension.
The maximum QPP amount will gradually increase from 25% of your MPE to 33%. Workers on the verge of retirement will see little or no benefit from this change, but for younger generations the difference could be substantial.

Public pensions: Sufficient or not?

As always, the answer depends on your desired standard of living and your forecast expenses in retirement. Unless you live very frugally, the OAS and the QPP will probably be insufficient. Let’s take the example of a 65-year-old engineer who, in 2023, is entitled to the maximum OAS and QPP benefits. His salary is $80,000 and he’s aiming to replace 60% of that income.

PensionsAge 65Age 70
Old Age Security pension
Old Age Security pension$8,250.72$11,220.96
Quebec Pension Plan
Quebec Pension Plan$15,678.84$22,263.96
Total pensions
Total pensions$23,929.56 $33,484.92
Income budgetAge 65 Age 70
Desired income
Desired income$48,000.00$48,00000

Public pensions won’t be enough to finance our engineer’s desired standard of living. If he starts receiving his pensions at age 65, they’ll provide only 43% of his desired income. If he defers them until age 70, they’ll provide 59%. That amount is better but still inadequate. In addition, by postponing them until age 70, he’ll have to make up the shortfall over five years if he still wants to retire at age 65.

Unless he is a member of an employer’s pension fund, our future retiree will need nearly $472,000 in his RRSP5 to make up the shortfall if he wants to receive his public pensions at age 65. As a result of the QPP enhancement, the younger generations can expect better coverage; but, without personal savings, they too will have difficulty maintaining their lifestyle.

Importance of sound financial planning

Public pensions are an integral part of your retirement plan. The amounts you’ll be entitled to and when you start collecting them will have a major impact on your retirement age and savings goals.

There are so many variables that calculating the possible scenarios can be difficult. Seeking guidance and advice from qualified people can help you make informed financial decisions.

Careful financial planning also includes a long-term investment strategy. The earlier you start investing, the more flexibility you’ll have when it comes to choosing your retirement plan and collecting your pensions.

Do you have that latitude?  

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