Skip to main content

David Boisclair is executive director and Colin Busby is director of policy and outreach at the Retirement Savings Institute at HEC Montreal.

The Quebec Pension Plan (QPP) is currently undergoing a broad review, something that takes place every six years. Experts are being interviewed and big issues will be debated. In 2023, Quebec is asking how it can improve or modernize the QPP, providing insights for its sibling plan, the Canada Pension Plan (CPP), which covers residents across the rest of the country.

Given that many countries around the world are revising their public pensions to grapple with the challenges of baby boomers entering retirement, an issue under review is whether the minimum retirement age should be increased. After all, the U.S. is gradually increasing the social security retirement age, which is now 67 for those born in 1960 or later, and France is proposing to increase its minimum age to 64, which would be up from age 60 in 2011.

Quebeckers and Canadians can apply for pension benefits at age 60, something that has been the case since the mid 1980s, but is this still suitable for our current context?

The main difference between public pensions in Canada and those abroad is how our governments in the 1990s addressed rising concerns about the ability to finance future benefits. Costs were to rise with demographics and contribution rates were set to increase substantially over a 30-year period. In response, the governments of Canada and Quebec agreed to raise CPP/QPP contribution rates and invest surplus funds not immediately needed to pay for benefits. Thanks to this we have financially sound pension plans today.

In contrast, many OECD countries continued with a pay-as-you-go system of financing benefits until cost pressures, which grew alongside continuing increases in life expectancy, prompted drastic changes. Many countries are raising the minimum retirement age in part because it helps solve financing pressures, but also because it is somewhat more palatable than the alternatives – stark increases in contribution rates on future workers or benefit reductions to current retirees. Canada and Quebec therefore do not need to raise the age for financial reasons, as our system is currently sustainable.

Another key difference is that in other countries, like France, citizens must stop working to apply for a public pension. Hence, setting a minimum age has important work force consequences as it can act as a strong prompt to encourage individuals to stop working. And as the population ages and workers become more scarce, the spillover effects on the broader economy are a major economic concern. In Canada and Quebec, however, it has been possible for years to collect CPP/QPP benefits and work at the same time.

Two mistakes people make when calculating when to start CPP based on life expectancy

The popularity of CPP/QPP take-up at age 60 has been decreased in recent years. Among women, the per cent of those who apply for the CPP at age 60 has fallen from 44 per cent in 2014 to 25 per cent in 2021. (QPP uptake went from 60 per cent to 36 per cent.) Men have seen roughly similar declines in early uptake, falling from 41 to 23 per cent (56 to 31 per cent for the QPP).

Although Canada and Quebec do not face the same financial pressures to raise the minimum age as other countries, a limited understanding of our multipillar retirement income system can, when combined with choice on when to take out a pension, lead to poor decisions. And low financial literacy that hinders individual decisions has consequences for our broader society.

EXPLAINER: CPP and OAS: How the financial supports affect your retirement plans

According to surveys, around three quarters of middle-aged Canadians are not aware that it is possible to both work and collect CPP/QPP benefits at the same time. Further, many often underestimate how long they will live in retirement and thereby leave money on the table by taking out a pension early and foregoing the higher benefits from later take-up.

Given significant gaps in understanding central aspects of individual financial plans, education is therefore a potentially powerful measure to encourage a later pension start date. There is room for experimentation with public policies as well as information nudges.

Clear-sighted, pro-active designs and reforms have allowed Canada and Quebec to avoid the financial pressures that are driving change abroad. But our incredible successes should not cloud the need for continuing improvements. Quebec and Canada should take steps to address information gaps to help people make better decisions about their own retirement.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe