About 2.3 million workers in Quebec, or nearly one in two, do not participate in any retirement plan, not even an RRSP. This includes 1.64 million workers with earnings below $30,000 and 428,100 with earnings between $30,000 and $50,000. There is no doubt that retirement promises to be financially difficult for a large proportion of these people.
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If the Legault government insists on raising the minimum age for eligibility for a pension under the Quebec Pension Plan (QPP) from 60 to 62, it will financially disadvantage many people, including those on low incomes and those in frail health.
This emerges from a plethora of briefs filed during the public consultation on the QPP that Treasury Secretary Eric Girard was holding with the aim of reforming the People’s Plan.
So if you are on a low income or in poor health, it is in your best interest to start receiving your QPP benefits as soon as possible, ie as soon as you reach retirement age. namely 60 years old.
The pension will be less generous as it will be reduced by 7.2% per year before the age of 65. For example, in 2023, instead of having access to a “maximum” pension of $15,679 at age 65, a person aged 60 could withdraw $10,035, a reduction of $5,644.
Important clarification: For low-income earners, the QPP pension is significantly lower than these amounts.
Let’s say a low-income person would be entitled to half the maximum pension from age 65, i.e. $7,840 per year. If she decides to start paying out her pension when she turns 60, she would collect $5,018.
If she waited two more years at age 62, the pension would be a little more generous. But when your income is low, it is obvious that you need the smallest source of income to survive financially. Waiting is not an option for these people.
Penalized twice
Another important factor to consider is that if a low-income earner waits until age 65 to pay out their QPP pension, they will be penalized by the federal government.
You should know that low-income individuals aged 65 and over are eligible for the GIS (Guaranteed Income Supplement), which currently totals $12,324 per year.
The problem ? The QPP pension reduces the GIS amount by 50 cents per dollar of QPP income for a single person. Specifically, the more the low earner delays access to their QPP pension, the more their pension is being cheated by the federal government.
This means his QPP pension is “taxed” at the 50% tax rate, which is a higher rate than the wealthiest taxpayers.
Any QPP pension drawn before the start of GIS receipt at age 65 will therefore not be penalized.
bad health
And in relation to those with health conditions, what is the benefit of receiving QPP benefits from the age of 60?
The proverb “one in the hand is better than two” serves as a good guide here. When our life expectancy is shortened by illness, it is to our advantage to redeem our QPP pension as much as possible.
Given the financial consequences that moving QPP pension entitlement from age 60 to age 62 will have for these two vulnerable groups of pensioners, the poor and the frail, the Legault government must abandon this proposal and thus maintaining the status quo.
This leaves people free to start drawing their QPP benefits at the age of 60 or slightly later.
But the rich…
Waiting as long as possible before starting to claim Quebec Pension Plan (QPP) benefits is a good financial deal if you have the means to afford it and you are in good health!
For what ? Because you benefit from an attractive pension increase of 8.4% per year for each of the five years after your 64th birthday, which corresponds to an increase potential of 42%.
This year, for example, the maximum annual pension at age 65 is currently $15,679. A person who has waited until age 70 to draw their pension will receive $22,264 or $6,585 more. And this surplus is paid to him every year until his death.
In addition, if the government decides to move the maximum age for starting QPP benefits from 70 to 75, it will no doubt serve the financial interests of wealthy and healthy retirees.
They would benefit from another tempting pension increase.
