Quebecers are more likely to start taking benefits from the Quebec Pension Plan at age 60 than other Canadians with their Canada Pension Plan benefits, according to a new study from the Institute for Research on Public Policy.
While deferring benefits is financially advantageous for some, the study found it might be prudent for single people and lower-wage earners to take their benefits right away.
In April 2019, the Canadian Institute of Actuaries proposed the government raise the eligibility for CPP and QPP benefits from age 60 to 62, as long as the pension provided to the 62-year-old would be the same as under the current system. It suggested the change would enhance the financial security of retirees and encourage people to retire later, alleviating anticipated labour shortages.
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The IRPP report also noted that raising the eligibility age would have the intended positive effect on most household incomes, but not on all. “Leaving aside the possibility of receiving social assistance, more than half of 60-year-old Quebecers would benefit from raising the eligibility age. Overall, the average gain — in after-tax, present value terms calculated at age 60 — could be more than $1,000. For those who gain and for those who lose, the average gain or loss would be around $3,000, respectively. Single people would be most likely to be among those who lose.”
It also found raising eligibility would reduce government expenditure on the guaranteed income supplement, but would increase costs for provincial social assistance. “Even if Quebec did not intervene directly to compensate those who lose out in the reform, the reform would still automatically result in an increase in social assistance expenditures. If it wished to provide more support to those who lose, the costs would, of course, be even greater.”
Quebec’s government could likely find a less expensive and complicated way to urge Quebecers to defer collecting their QPP benefits, said the report. “Possible measures, including changing how information on pension deferral is presented to the public (this is already underway) or better spreading the penalty for early pension take-up, could help future retirees make better financial decisions to meet the challenges of living longer.”
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