QPP enhancement: another step towards financial security
Article revised on 1 March 2019
The Quebec Pension Plan enhancement became effective on January 1, 2019. This significant change assures Quebec employees of increased retirement benefits, strengthens financing of the public insurance plan and preserves intergenerational equity. This enhancement also has an impact on your financial planning.
Two plans in place
Under this enhancement, an additional plan in two stages will be introduced to complement the base plan.
The base plan is the one in which employees and employers each contribute 5.55% for the portion of earnings between $3,500 and the maximum pensionable earnings (MPE) ($57,400 in 2019).
The additional plan is the one where additional contributions are paid by employees and employers according to a rate that will gradually increase by 1% from 2019 to 2023.
In 2019, the Quebec Pension Plan contribution rate is 11.10%, i.e. 10.80% for the base plan and 0.3% for the additional plan.
The purpose of the increase in the contribution rate is to finance the income replacement rate, which will also increase gradually. That rate represents roughly 25% of the earnings on which you contributed. It will gradually increase to 33,33% between now and 2065.
As of 2024, a contribution rate of 4% will be added to the portion of earnings between the MPE and a new pensionable earnings ceiling, which will be 107% of the MPE as of 2024 and 114% as of 2025.
Increased retirement income
The QPP plan enhancement will be good for the younger generation, in particular, as it will significantly improve their retirement benefits. The full effect of the changes will be achieved in roughly 40 years. Employees retiring in the next few years will take advantage of increased QPP benefits based on the number of years during which they contributed to the additional plan.
To ensure you have sufficient income for retirement, develop an investment strategy and get clarification of how this enhancement may impact your future income, feel free to contact a financial security advisor. He or she will analyze your situation and give you sound, personalized advice on how to achieve your financial goals.
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