Sometimes, even if the intention is good, the idea does not pass.
This was noted on Wednesday by Finance Minister Eric Girard during the first day of discussions on the future of the Quebec Pension Plan (QPP). This exercise, which takes place every six years, allows the government to submit for public scrutiny a series of ideas to adjust the regime to changing realities.
The vast majority of proposals on the table generated little debate. In fact, only the idea of raising the minimum age for withdrawing a pension from 60 to 62 gave rise to more heated discussions, arousing unanimous opposition. Actuaries, unions, elders, youth, everyone who spoke disagreed.
Contrary to what one might think, unless you are an expert in the field, this suggestion from Quebec would not improve the plan’s finances, which are already healthy and enviable, it should be noted. In fact, it’s quite the opposite.
The explanation is quite simple. Pensions withdrawn before age 65 are reduced. At age 60, for example, the “penalty” is 36%. This carries over to the rest of life. Rather, it is Quebecers who wait until age 68 or even 70 to claim their pension (increased, in this case) who are putting increased pressure on QPP finances.
Currently, one out of three Quebecers (33%) applies for their QPP pension at age 60.
“What is proposed to raise the age to 62 is for the financial security of workers, and it will cost the regime money,” Minister Eric Girard repeated a few times during the daytime.
Of course, the check received at age 62 will be higher than the one that would have been obtained at age 60. But as the president of the CSN, Caroline Senneville, mentioned, “we cannot tell someone not to eat for two years because in two years, his retirement pension will be bigger”.
This is where the good intention from the start – to ensure that the monthly pensions paid to Quebecers are higher – collide with reality.
In real life, some Quebecers have to withdraw their QPP pension at age 60 to meet their needs, due to a lack of sufficient income. We can think of those who abandon the labor market because their body is worn out after having held a very physically demanding job. Some people leave the labor market because their health is fragile, they are ill or their life expectancy is shorter. Others can no longer endure the stress of a job. Also discussed were workers who are victims of ageism and caregivers who can no longer work full time. The scenarios are multiple.
Postponing the minimum age for access to the QPP to 62 would plunge these vulnerable people even further into financial insecurity, Minister Eric Girard was told all day. However, the goal is the opposite.
Like others, the FTQ mentioned that the poverty rate among 60-64 year olds was higher than among other age groups. This situation can be explained by the fact that people who retire from the labor market do not have access to the Old Age Security pension before age 65. In addition, the disbursement of savings (LIRA, defined contribution plan) is not always possible.
“From a strictly actuarial point of view, 90% of the world should not be taking their pension at age 60. But for a minority, it’s the right thing to do. It’s a minority, but it exists […] Financially, this is not a good option, but should this possibility be taken away from everyone? asked Bernard Morency, actuary and associate professor at HEC Montreal’s Retirement and Savings Institute.
It is indeed important to maintain a plan that offers flexibility to its beneficiaries.
But that comes with a certain responsibility on the side of the QPP: to properly inform Quebecers of their options, in clear and simple language. As I have already written1the document heading for retirement transmitted to future retirees is difficult to understand, even when one is good at mathematics. It is therefore difficult to expect people with little education to make informed choices, especially in the absence of professional advice… advice which generally comes with investments in a financial institution. In Quebec, two million workers have neither a company pension plan nor an RRSP.
Holder of the Research Chair in Taxation and Public Finance at the University of Sherbrooke, Luc Godbout has also suggested that the document heading for retirement change of name and that the emphasis be placed on the pension payable at age 65, and not that at age 60.
As Minister Girard said, it is the less fortunate who have the best interest in waiting to claim their pension. Mathematically, it is. But these are also the people who most need to receive a check from Quebec at age 60 or 61, no matter how small.
This, in itself, is a social issue that would require a good dose of creativity.