On March 17, Quebec's Minister of Finance announced adjustments to the Quebec Pension Plan (QPP). Among others, a newly introduced voluntary retirement savings plans (VRSPs) will complement the province's mandatory earnings-related pension program. The measures are expected to be introduced to the provincial parliament in the coming weeks. According to the government, the measures address the fiscal pressures of a rapidly aging population: Quebec’s population will age at one of the fastest rates in the world over the coming years, with the ratio of workers to retirees expected to reach 3:1 by 2020, down from 8:1 in 1980.
To ensure the long-term stability of the QPP, the contribution rate (funded equally by employers and employees) will be raised by 0.15% per year over a period of 6 years until it reached 10.8% in 2017.
In addition, to encourage later retirement, the proposed bill calls for an increase in the accrual rate of pension benefits (from the current 0.5% per month to 0.7%) for workers who delay retirement past the full retirement age of 65. Workers who retire before age 65 would have their benefits reduced at a higher rate of 0.6% per month, up from 0.5%.
In addition, the bill aims at increasing saving through the introduction of VRSPs, particularly among workers who are not currently covered under an employer-sponsored pension plan. Under the proposed bill, employers who currently do not provide their own private plans to their employees must offer a VRSP. Employees would be automatically enrolled in the new plans, but may opt out if they wish. Contributions would be collected by employers, but managed by private financial institutions.
It is noteworthy that currently less than half of all workers in Quebec are covered by an employer-sponsored pension plan.
Article with courtesy of Social Security Online
Sources:"A Stronger Retirement System: Meeting the Expectations of Quebecers of Every Generation" and "Budget at a Glance: Budget 2011–2012," Finances Quebec, March 2011.