The pension plan in Quebec is a complex system aimed at ensuring income for individuals during retirement. It consists of several key elements that complement each other to provide income coverage after the end of professional activity. Here is an overview of the main pension plans in Quebec and how they work.
1. The Quebec Pension Plan (QPP)
The Quebec Pension Plan (QPP) is the primary public retirement plan in Quebec. It is mandatory and applies to all individuals working in Quebec.
All workers and employers must contribute to the QPP, with specific exemptions. The contribution rate is 12.3% (in 2024), shared equally between the employer and the employee. Self-employed individuals pay the full contribution themselves.
Contributions are deducted from work income up to the maximum pensionable earnings (MPE), which was $68,500 in 2024.
Pension benefits and retirement age in Quebec
Retirement benefits from the QPP can be claimed as early as age 60. However, the amount will be reduced if taken before age 65 and increased if taken after age 65, up to age 70.
The amount of the pension depends on your earnings during your working life, the number of years you contributed, and the age at which you begin receiving the pension.
The different types of QPP pensions
- Retirement: for individuals who retire,
- Disability: for contributors who became disabled before age 65,
- Survivor: for surviving spouses and dependents of a deceased contributor,
- Orphan: for dependents of a deceased contributor.
2. The Guaranteed Income Supplement (GIS)
Although this is a federal program, the complements the QPP for Quebec residents with low income. It is for individuals aged 65 and older who receive Old Age Security (OAS). The amount varies based on the individual or couple’s income.
3. Employer pension plans
These plans are established by employers to provide additional retirement benefits to employees. There are generally two types of employer pension plans:
Defined benefit plans (DBP)
Benefits are determined in advance based on a formula that takes into account salary and years of service. The employer is responsible for ensuring that sufficient funds are available to cover promised pensions.
Defined contribution plans (DCP)
Employer and employee contributions are fixed, but the benefits received at retirement depend on the returns on the pension fund investments.
4. Registered Retirement Savings Plans (RRSP)
The Registered Retirement Savings Plan (RRSP) is a personal savings account that allows individuals to set aside money for retirement while deferring taxes on contributions and earnings until the money is withdrawn.
You can contribute up to 18% of your earned income from the previous year, up to an annual maximum set by the Canada Revenue Agency (CRA).
5. Worker funds and FHSA
Quebecers can also contribute to worker funds (e.g., Fonds de solidarité FTQ, Fondaction) that offer additional tax credits.
Quebec pension plans also include the First Home Savings Account (FHSA)</strong). Although focused on homeownership, the FHSA can also indirectly contribute to retirement planning.
How secure are pension plans in Quebec?
Pension plans, especially employer plans, are governed by the Supplemental Pension Plans Act and overseen by the Quebec Pension Plan (now Retraite Québec). This regulatory framework is designed to protect participants’ rights and ensure the sustainability of the plans, while informing citizens about retirement planning.
There are also tax optimization strategies for Quebec retirees, such as:
- Income splitting: allows spouses to share certain pension income to reduce overall taxes.
- RRSP conversion to a Registered Retirement Income Fund (RRIF): at age 71, an RRSP must be converted into an RRIF or used to purchase an annuity.
- Withdrawal from the plan: it is possible to withdraw accumulated amounts from certain pension plans under certain conditions (e.g., upon changing employers or reaching retirement age).
Plan your retirement with certified tax professionals
The Quebec retirement system combines public pension plans, employer plans, and personal savings tools to provide financial security to individuals after their professional careers. Planning your retirement according to your goals and needs is crucial to maximizing benefits and maintaining an adequate standard of living after age 65.
For effective planning, contact one of our certified tax professionals to discuss your plans.
