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Quebec retirement pensions in crisis as province faces aging population, fewer workers

The financial crunch facing the QPP amounts to a simple equation: retirement pensions are being paid over a longer period for a greater number of retirees. At the same time there are fewer workers contributing to the plan.

That means that for the first time in its history, Quebec needs to come to terms with a quickly aging population that is living longer while the population of working age is in decline.

"The number of retirees will rise more quickly than elsewhere in Canada while the number of people of working age will start to decline in 2014. The combined effect of aging and a decline in the number of workers will have a major impact on the funding of the QPP," a Ministry of Finance document stated.

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Quebec has urged Ottawa to support the Volunteer Retirement Savings Plan as one of the least costly ways to ensure that everyone, especially those without employer-sponsored pension plans, will receive retirement coverage.

Quebec faces an acute problem. In 2020 there will be 1.7-million Quebeckers over the age of 65, three times the number it was in 1980.

During the period between 2013 to 2030 the population of working age will actually decline in Quebec by 3.8 per cent. During the same period that number will increase by 5.5 per cent in Canada and 9.6 per cent in Ontario.

"This comparison with our largest trading partners shows the magnitude of the challenge facing Quebec," according to the Ministry's assessment..

Which was why Finance Minister Raymond Bachand insisted on the need to move now to increase the contributions by employers and employees, given the urgent need to fill the QPP coffers to meet its future needs.

Under the current contribution rate of 9.9 per cent , benefits paid by the plan will exceed contribution in two years. Without immediate adjustments, the Finance Ministry contends that the plan will be totally depleted by 2039.

The contribution rate will rise incrementally from 9.9 per cent to 10.85 per cent over the next six years.

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The report also addresses an issue federal Finance Minister Jim Flaherty has tackled in recent months. Ottawa has proposed to increase the yearly maximum pensionable income level from the current $48,300.

But raising the cap would only benefit workers making more than $48,300 a year which represents about 30 per cent of the province's workers.

Another option would be to increase the 25 per cent replacement. Under the current system employees receive a quarter of up to a maximum of $48,300 in yearly earning or about $12,000 a year. Increasing the rate would benefit all employees.

A combination of the two scenarios is also being considered by Ottawa and the provinces. However, Quebec fears that drastic changes to the retirement income system may have a negative impact on the economy.

That explains why it prefers to promote a voluntary initiative such as the voluntary savings plan which the government contends would not burden companies yet offer a alternative to employees.

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About the Author
Quebec City political correspondent

Rhéal Séguin is a journalist and political scientist. Born and educated in southern Ontario, he completed his undergraduate degree in political science at York University and a master's degree in political science at the Université du Québec à Montréal.Rhéal has practised journalism since 1978, first with Radio-Canada in radio and television and then with CBC Radio. More

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