Recent amendments to the Quebec Pension Plan to encourage people to work past age 65 offer more flexibility on contributions and retirement age, says Bonnie-Jeanne MacDonald, director of financial security research for the National Institute on Ageing at Toronto Metropolitan University.
“If people are accumulating a pension, working longer could potentially increase their pension,” says MacDonald, who was among the experts who provided the Quebec government with testimony that led to the amendments. “With the [Canada Pension Plan] and the QPP, if you work longer, you can also contribute more to make the base higher. At the same time, the pension plan will apply another adjustment to account for the fact that you’re taking it at a later age.”
As of Jan. 1, 2024, the maximum age at which an individual can apply for QPP benefits will be raised from age 70 to 72. At age 72, employee and employer contributions to the QPP will cease.
While baby boomers can expect their retirements to be more than 20 per cent longer than those of their parents, adds MacDonald, they aren’t going to have the same secure workplace pension income or investment returns. “If interest rates and returns, on average, aren’t that high but you have high inflation, it could make it even harder to finance longer retirement periods. People can’t control the market or inflation, but what they can control is how long they work.”
Also under the changes, Quebec workers aged 65 and older who receive pension benefits will be able to opt out of contributing to the plan. MacDonald notes CPP members aged 65 to 70 are currently allowed to opt out of contributions, so it makes sense that QPP members will be allowed to do the same.
In addition, the provincial government announced changes that will financially benefit those who drop down to part-time work. Under the new formula, after age 65, lower earnings won’t have a negative impact on pensions.
“Something important to remember is this is not for everyone,” says MacDonald. “It’s a voluntary choice. There are a lot of people who can’t work longer. Also, seniors do valuable things in the community that don’t earn income, like caring for others and volunteer support. So even if people aren’t working, they’re still making valuable contributions to the community.”