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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.
