Most Quebecers do not put enough money aside to ensure they have a good standard of living in retirement. What can be done to improve the situation as we live longer and longer?
The newspaper offers today a 10-page file to take stock of this fundamental issue for our future:
- Daniel Germain examines the state of the Quebec Pension Plan (QPP);
- Michel Girard draws a health check of employer pension plans in the face of the rout of the markets;
- Hélène Schaff wonders if we should raise the retirement age;
- Emmanuelle Gril presents the case of a pensioner suffocated by his debts;
- Francis Halin tells us the story of a happy ex-self-employed worker despite his tight retirement budget.
The experts agree: to rely solely on the QPP and the Old Age Security pension is to condemn oneself to poverty.
“We’re talking about $33,700 a year at most, or $16 an hour,” summarizes Clément Hudon, professor of financial planning at TELUQ.
We ask too much of the RRSP
To compensate, the financial industry and governments have greatly touted the RRSP, but many people are not keen on the idea of managing their own retirement savings.
“The RRSP, at first, was a very niche product. It has been expanded as employer plans have shrunk. There, we are coming a bit to the end of this model, ”said François L’Italien, coordinator of The Observatory of Retirement, which organized a first summit on the subject this week.
“We must extract the retreat from a narrow circle of experts and specialists who, without always wanting to, keep the thing very technical, repulsive and difficult to access for ordinary mortals”, he insists.
A good time to talk about it
According to the specialists we consulted, being a homeowner and benefiting from an employer-sponsored pension plan are among the best ways to ensure a good income after age 65.
“With a plan where the employee contributes 8% of his salary and the employer 4%, the majority of people could retire with an income equivalent to 70% of what they earned while working and maintain their level of life,” says Mr. Hudon.
In these times of labor shortage, “there has never been a better time” to convince employers to contribute more to the retirement of their employees, he believes.
After all, investing in retirement is not only good for individuals, but also for society.
“In 2040, when we’re going to have 28% of the population who will be aged 65 and over, if their standard of living drops markedly on retirement because they have no savings, well, it’s the economy in general that will suffer as well as the governments that will have to take over with social programs,” underlines Yves Carrière, professor of demography at the University of Montreal.
ENHANCE (FURTHER) THE QPP
In 2019, the Quebec Pension Plan (QPP) was improved to ensure that by 2065, its benefits cover on average 33% of a retiree’s income. Currently, this proportion is around 25%. To do this, QPP contributions paid by both the employee and the employer have gone from 5.4% to 6.15% of salary and will reach 6.4% next year. Experts believe that we should go for another bonus. Demographer Yves Carrière points out that in other countries, contribution rates to public pension plans are even higher than here. Richard Guay, former CEO of the Caisse de depot, warns, however, that too high contributions would harm young people who want to buy a first home, an investment that generally promotes good financial health in retirement.
COMPULSORY EMPLOYER SCHEMES
Barely 40% of Quebecers have a pension plan from their employer. A few years ago, Quebec introduced the Voluntary Retirement Savings Plan (VRSP) with the aim of raising the bar, but its success has been mixed. For Clément Hudon, professor at TELUQ, the time has come to do like other countries and to oblige workers and employers to contribute to a supplementary pension plan. “You have to help people help themselves,” he says. Some things should be mandatory. »
MORE MULTI-EMPLOYER PLANS
Since 2008, the employees of more than 900 Quebec community organizations have benefited from a collective pension plan. The advantages of this model? Easier management for employers, lower management fees and better benefits for retirees. Employers in other sectors could learn from this unified approach.
MERGE WITH CANADA
It is little known, but since 2012, Quebecers pay more for the QPP than residents of the rest of Canada for the Canada Pension Plan (CPP). Why ? Mainly because the QPP was running into a chronic deficit stemming from the pronounced aging of the Quebec population. Merging the QPP with the CPP would dilute this effect, but the Caisse de depot would lose a large depositor. “I would be surprised if this idea were viable in Quebec,” launches Richard Guay.