FEATURE ARTICLE
If we project these benefits using an annual
inflation assumption of 2.0% for the OAS and 3.0%
for the QPP, the maximum QPP benefit will be
three times higher than the OAS by 2065: $53,341
compared to $17,648. Note that the calculation for
the OAS in 2065 can be summed up as $7,384
1.02
44
. For the maximum QPP retirement pension,
the calculation is not as straightforward, since the
maximum base benefit in 2021, $14,445, uses the
average of the last five years of MPE. We therefore
cannot simply project this maximum benefit; we
have to project the future MPE and then calculate
the maximum benefit. Finally, note that this first
set of projections does not take into account
the two recent improvements to these plans —
the major QPP reform launched in 2019 and the
announcement of a 10% increase in OAS beginning
July 2022 for Canadians 75 and over.
Projection for both improved plans
If we take these two improvements into considera
-
tion, this is what the projections look like.
Source : ConFor financiers inc.
Note, first, that the maximum QPP benefit for 2021
changes from $14,445 in the previous graph to
$14,499. This increase is based on two partial years
of the QPP increase: 2019 and 2020. Note also that
there is a little inconsistency in the comparison of
the OAS and the QPP, because here we are show
-
ing the maximum QPP benefit at age 65, whereas
we are showing the maximum OAS benefit at age
75. This is still the best way to present and compare
the impact of the improvements.
In 2065, therefore, the maximum QPP benefit will
be four times higher than the OAS—4.17, to be ex
-
act—at $81,051 compared to $19,413. The maximum
benefits at age 65 would be $81,051 for the QPP
compared to $17,648 for the OAS. The ratio be-
tween them would be 4.6.
The prevailing trend in recent years concerning
the difference between these two benefits will be
further amplified by the major improvement in the
QPP. As our graphs illustrate, the projected maxi
-
mum QPP retirement pension in 2065 is almost
52% higher ($81,059 compared to $53,341). It is
certainly true that QPP contributions will increase
to finance this improvement, but we are talking
about an increase of approximately 30% in con
-
tributions for a potential increase of nearly 52% in
benefits. The transaction appears to be profitable
for the participant.
Conclusion
The relative weight of the OAS to the QPP has al
-
ready declined significantly in recent years. As time
passes, the gap will continue to grow. Our clients'
retirement plans must take this reality into account!
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