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Pension Funds

Quebec Pension Plan adds enhancements mirroring CPP

Quebec Pension Plan, Quebec City, will add an enhancement to the C$62.2 billion ($48.5 billion) plan that mirrors enhancements approved last year to the Canada Pension Plan, Ottawa, according to legislation introduced Nov. 2 by Quebec Finance Minister Carlos Leitao.

Under the legislation, QPP will increase employer and employee contributions by up to 1 percentage point each by 2025 and will raise benefits to one-third of pensionable earnings from 25%.

The percentage-point increases are the same approved by Canadian provinces, except Quebec, for the Canada Pension Plan in 2016. The CPP does not cover Quebec residents.

However, QPP contributions will increase to a combined 11.9% of pay, split evenly between employers and employees. The CPP increase will be added on the current 9.9% combined contribution rate, increasing it to 10.9%; Quebec employers and employees already contribute 10.9% total to the plan.

Demographic issues — chiefly the higher number of those age 65 and above in Quebec vs. the rest of Canada — made it difficult for Quebec to immediately adopt the CPP enhancements, said Daniel Beland, Canada research chair in public policy at the Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan, Saskatoon. Mr. Beland co-authored the paper, "Federalism, Policy Feedback, and the Politics of the Canada and Quebec Pension Plans."

"Quebec was not on board with the CPP expansion (in 2016) because the demographics there were not as favorable," Mr. Beland said.

Data from the academic paper show that Quebec's ratio of people age 20-64 to those age 65 and above was 3.5-to-1 in 2015, but is expected to decline to 2-to-1 by 2030, compared to 2.6-to-1 in the rest of Canada and 2.7-to-1 in the U.S.

"The debate about CPP was only about expansion," he said. "The debate on the QPP was dual — the adequacy of current benefits and the long-term sustainability of the QPP. It became clear that the contribution increase made by CPP was not enough to allow the QPP to maintain its ... replacement rate."

Quebec Pension Plan assets are managed by the C$286.5 billion Caisse de Depot et Placement du Quebec, Montreal.

The QPP legislation requires approval of the National Assembly, Quebec's parliament.