The Quebec government’s Bill 126 concerning the Pension Plan of Management Personnel (PPMP) was passed on May 11, 2017 in the National Assembly. The changes are aimed at fostering the plan’s sustainability and financial health.
Here are how the five changes affect PPMP contributors:
1. Eligibility for an unreduced pension
Before July 1, 2019: Two eligibility criteria
- Age 60
- Age 55 and 90 factor (age + years of service)
As of July 1, 2019: Three eligibility criteria
- Age 61
- Age 58 and 90 factor (age + years of service)
- Age 56 and 35 years of service
2. Average salary for calculating pension benefits
Currently, the average salary is based on the employee’s three best-paid years. As of July 1, 2019, it will be based on the five best-paid years.
3. Maximum number of service years
The maximum number of years of service that can be used to calculate pension benefits will increase progressively as of January 1, 2017 up to 40 years on December 31, 2018. As a result, the maximum basic pension that you could receive will increase from 76% to 80% of your average eligible salary.
4. Rate of reduction for an early pension
If you wish to take advantage of an early retirement, the reduction rate will increase from 4% to 6% on July 1, 2019
5. Pension indexing
Indexation for pensions starting before July 1, 2019 will be suspended for six years (2021–2026). The table below shows how indexation will be applied following this suspension.
|Period of service||Indexation rate that applies after the suspension|
|Years of service accrued before July 1, 1982||50% of the RIPI
(rate of increase of the Pension Index)
|Years of service accrued from July 1, 1982 to December 31, 1999||RIPI less 3%|
|Years of service accrued since January 1, 2000||The higher of: RIPI less 3% or 50% of the RIPI|
Source: Retraite Québec
The new rules described above will apply to progressive retirement agreements ending after June 30, 2019.
Transitional measures will apply for progressive retirement agreements that began before February 8, 2017. If you wish, you can postpone the date on which your progressive agreement ends or continue working even after your agreement ends by giving notice 12 months before the scheduled end of the agreement.
What these changes mean
Here’s a list of questions you should ask yourself:
- At what age do I become eligible for my pension without any actuarial reduction?
- What is the financial impact of requesting my pension before or after June 30, 2019?
- What is the impact on my average salary?
- If I am thinking of retiring during the second quarter of 2019 or 2020, how can I mitigate the consequences?
Your advisor is your best ally
Your La Capitale financial security advisor can guide you, using an overall strategy, but customized to your situation. He or she has unique and accurate tools for projecting your retirement income, especially from a PPMP. Your advisor can analyze your financial situation, taking into account all its elements, whether it be your pension plan, your coverage or other financial security, your current savings and strategies to meet your needs.