La Cible

Aout 2021

La Cible, magazine officiel de l’IQPF, est destinée aux planificateurs financiers et leur permet d’obtenir des unités de formation continue (UFC). Chaque numéro aborde une étude de cas touchant les différents domaines de la planification financière.

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Page 28 of 29

29 QPP AND OAS: PROGRESSION AND PROJECTIONS The Québec Pension Plan (QPP) and the Old Age Security (OAS) pension have undergone a number of changes over the past few years. Some of these changes have had negative impacts for individuals (increase in penalties for early retirement and contribution rates for the QPP, increase in OAS eligibility age to 67, which was subsequently cancelled). Other changes have had positive impacts for individuals (major reform of the QPP launched in 2019, announcement of a 10% increase in the OAS as of July 2022 for Canadians 75 and older in the 2021 federal budget). Will these changes have an impact on the long-term progression of these two plans and their relative weight? Past Progression of Benefits The OAS pension was established in 1952 (to replace another program dating back to 1927), and the QPP was introduced in 1966. The QPP retirement benefit for a contributor who applied for the benefit before January 1, 1976, was only partially paid. On January 30, 1967, the first retirement pension payment was paid to a man named Rogers-H. Taschereau, from Québec City. In 1967, the maximum annual benefit was $239.64. To avoid overly complex figures, the QPP 's transitional period from 1966 to 1975 will not be illustrated here. Nor will we consider the Guaranteed Income Supplement (GIS) or the OAS recovery tax. The graph starts in 1976, the time at which full QPP benefits became payable, and presents the progression of maximum benefits payable by these two government programs. The amounts shown are the maximum benefits payable at age 65 and represent only the benefits payable under the QPP base plan, before the 2019 increase. FEATURE ARTICLE Martin Dupras ASA, F.Pl., M. Fisc., ASC, IQPF Fellow Founding President ConFor financiers inc. Source : ConFor financiers inc. You can see that the maximum benefits payable by these two plans were almost equal in 1976. Since then, however, the average annual increase in the maximum QPP benefit has been about 5%, while the average annual increase in the maximum OAS benefit has been in the order of 3.5%. The result is that in 2021, the maximum QPP benefit is almost double the OAS: $14,445 compared to $7,384. Projection for Both Plans The graph below presents the data from the previous graph, as well as a projection to 2065 of the maximum benefits for these two plans, using the IQPF/FP Canada Projection Assumption Guidelines for inflation. These Guidelines suggest a 1.00% difference between the inflation rate, which is used to project the OAS, and the maximum pensionable earnings (MPE) growth rate, which is used as the basis for establishing the maximum QPP retirement pension. The complete Projection Assumption Guidelines document explains the logic for using different projection assumptions for inflation (OAS) and the increase in MPE (QPP). Source : ConFor financiers inc.

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