The enhancement of the Québec Pension Plan (QPP)introduces an additionalplan. Since 2019, the QPP comprises 2plans:
- the base plan was in place before the enhancement of the QPP. In the plan, employees and employers each contribute 5.4% for the portion of earnings between $3500 (the basic exemption) and the maximum pensionable earnings(MPE).
- the additional plan provides for additional contributions to be paid by employees and employers according to a rate that gradually increased from 2019 to2023. As of 1January2024, new contributions will be added to the portion of earnings between the maximum pensionable earnings (MPE) and the new eligible earnings cap on which contributions are made, which will be $73200 in2024, that is, 107% of theMPE and 114% of theMPEas of2025.
Note that
Contributions to the Québec Pension Plan are divided equally between employees and employers. Self-employed workers pay the entirecontribution.
Individuals who contribute to the additional plan will gradually see higher benefits in retirement, or in the event of death ordisability.
Advantages for futureretirees
The additional plan willprovide future retirees with the followingadvantages:
- The rate at which income is replaced will be higher.
The rate will increase from 25% to33.33%. It will contribute to higher retirement pensions. Since the increase is gradual and determined depending on the number of years of contribution to the enhanced part of the Plan, the generation of employees entering the labour market will benefit from the most significant increase in their retirement pension, whereas persons who will retire in the coming years will benefit from an increase in their pension in proportion to their number of years of contribution to the additionalplan.
- The eligible earnings cap will beincreased.
The cap will increase for two years, in2024 and2025, until it reaches 114% of the maximum pensionable earnings (MPE). The new cap will allow individuals whose salary exceeds theMPEto contribute more and receive benefits prorated to their contributions so that they can also benefit from the 33.33% income replacementrate.
A significant increase in the amount of your retirementpension
The enhancement of the Québec Pension Plan will be carried out gradually. Specifically, additional benefits will be based on the number of years of contribution as of2019. The full effect of the changes on benefits will be achieved in roughly 40years.
This means that young employees will benefit from the most significant increase in their retirement pension. A portion of the pension of older employees will increase based on their years of contribution to the additional plan under theQPP.
In2024 dollars, the maximum retirement pension of the base plan under the QPP is $16015 for a person who applied for it at age65 and whose income was $73200. Further to the implementation of the additional plan, the retirement pension will gradually increase to $24409 in 40years, which is an increase of more than52%.
Some examples
The following examples show that, based on your gross annual earnings and the number of years of contributions to the additional plan, the amount you will receive under the Québec Pension Plan, if you retire at age65, will beincreased.
| Name | Year of birth | Year of retirement at age65 | Pension per yearSee Note1 (base plan) | Pension per yearSee Note1 (additional plan) | Total annual amount of enhanced pension | % at which gross annual income of $40000 isreplaced |
|---|---|---|---|---|---|---|
| Alice | 1957 | 2022 | $8955 | $71 | $9026 | 23% |
| Charles | 1963 | 2028 | $9609 | $536 | $10145 | 25% |
| William | 2000 | 2065 | $9609 | $3362 | $12971 | 32% |
- Maximum retirement pension, taking into consideration that the employment earnings are less than theMPE($68500in2024 dollars) and depending on the number of years ofcontributions.
- Alice is taking advantage of the enhancement of the Plan in proportion to the contributions she made to the additional plan from 2019 to2021.
- Charles istaking advantage of the enhancement to the Québec Pension Plan, in proportion to the contributions he made to the additional plan from 2019 to2027.
- William is taking full advantage of the enhancement, proportionally to the contributions he has made to the additional plan for at least 40years.
As a result of the enhanced plan, William's gross annual income isreplaced at a rate of32%. In addition, the retirement benefits he received haveincreased by more than 35% from $9609 to $12971 (an increase of$3362).
| Name | Year of birth | Year of retirement at age65 | Pension per yearSee Note1 (base plan) | Pension per yearSee Note2 (additional plan) | Total annual amount of enhanced pension | % at which gross annual income of $73200 isreplaced |
|---|---|---|---|---|---|---|
| Charlotte | 1957 | 2022 | $14925 | $118 | $15043 | 21% |
| Paul | 1963 | 2028 | $16015 | $1153 | $17168 | 23% |
| Anthony | 2000 | 2065 | $16015 | $8564 | $24579 | 34% |
- Maximum retirement pension, for employment earnings equal to or greater than theMPE.
- Maximum retirement pension, for employment earnings equal to or greater than 114% of the MPE and depending on the number of years ofcontribution.
- Charlotte is taking advantage of the enhancement of the Plan in proportion to the contributions she made to the additional plan from 2019 to2021.
- Paul istaking advantage of the enhancement to the Plan, in proportion to the contributions he made to the additional plan from 2019 to2027.
- Anthony istaking full advantage of the enhancement to the plan, since he has contributed to the additional plan for at least 40years and his earnings are equal to the eligible earningscap.
As a result of the enhanced plan, Anthony's gross annual income is replaced at a rate of34%. In addition, the retirement benefits he receivedhave increased by53%from $16015 to$24579 (an increase of$8564).
Other useful information
- Frequently asked questions on the enhancement of the Québec PensionPlan
