Pensions Plans
There are three kinds of pension plans/programs.
When Should You Retire?
Choosing the age at which to retire should not be taken lightly, especially if you don’t have a lot of personal savings and you’re banking on pension plans.
You can start receiving public pension plan benefits when you turn 60, but only from provincial plans. The situation greatly improves if you retire at age 65. See for yourself in the two tables below.
| Source of disposable retirement income per age group | ||||
|---|---|---|---|---|
| Sources of Income | Age 55 | Age 60 | Age 65 | Age 70 |
| Old Age Security (OAS) pension | No | No | Yes | Yes, and increased |
| Guaranteed Income Supplement (GIS) | No | No | Yes, under certain conditions | Yes, under certain conditions |
| Quebec Pension Plan | No | Yes, but reduced | Yes | Yes, and increased |
| Supplemental pension plan (pension fund) | Possibly | Possibly | Yes | Yes |
| Personal savings | Yes | Yes | Yes | Yes |
| Public Retirement Plan Benefits for a Single Individual in 20201 | |||||
|---|---|---|---|---|---|
| Retirement at Age 60 | |||||
| Average annual employment earnings2 | Quebec Pension Plan (QPP) | Old Age Security (OAS) pension | Guaranteed Income Supplement (GIS)3 | Annual total | % of income replaced by public plans |
|
$30,000 |
$4,737 |
$0 |
$0 |
$4,737 |
16% |
|
$35,000 |
$5,486 |
$0 |
$0 |
$5,486 |
16% |
|
$40,000 |
$6,224 |
$0 |
$0 |
$6,224 |
16% |
|
$45,000 |
$6,950 |
$0 |
$0 |
$6,950 |
16% |
|
$50,000 |
$7,665 |
$0 |
$0 |
$7,665 |
16% |
|
$55,000 |
$8,368 |
$0 |
$0 |
$8,368 |
15% |
|
$60,000 |
$9,060 |
$0 |
$0 |
$9,060 |
15% |
|
$65,000 |
$9,042 |
$0 |
$0 |
$9,042 |
14% |
|
$70,000 |
$9,279 |
$0 |
$0 |
$9,279 |
13% |
|
$75,000 |
$9,279 |
$0 |
$0 |
$9,279 |
12% |
|
$80,000 |
$9,279 |
$0 |
$0 |
$9,279 |
12% |
| Retirement at Age 65 | |||||
|
$30,000 |
$7,061 |
$7,421 |
$2,459 |
$16,941 |
56% |
|
$35,000 |
$8,238 |
$7,421 |
$0 |
$15,659 |
45% |
|
$40,000 |
$9,415 |
$7,421 |
$0 |
$16,836 |
42% |
|
$45,000 |
$10,592 |
$7,421 |
$0 |
$18,013 |
40% |
|
$50,000 |
$11,769 |
$7,421 |
$0 |
$19,190 |
38% |
|
$55,000 |
$12,946 |
$7,421 |
$0 |
$20,367 |
37% |
|
$60,000 |
$14,123 |
$7,421 |
$0 |
$21,544 |
36% |
|
$65,000 |
$14,499 |
$7,421 |
$0 |
$21,920 |
34% |
|
$70,000 |
$14,499 |
$7,421 |
$0 |
$21,920 |
31% |
|
$75,000 |
$14,499 |
$7,421 |
$0 |
$21,920 |
29% |
|
$80,000 |
$14,499 |
$7,421 |
$0 |
$21,920 |
27% |
Your Standard of Living: A Balancing Act!
The maximum benefits from pension plans do not increase according to your employment income from your working years. On the contrary—as shown in the table below, the higher your standard of living during your working life, the lower the percentage of income that is replaced by public plans. The portion of income covered by public plans varies widely from $15,000 and $50,000—and not for the better!
So, if you want to maintain your standard of living after retirement, you are better off having sources of income other than those from the government. At the risk of sounding redundant, you will need 70% of the gross annual income earned during your last three years of work to maintain the same standard of living at retirement.
Example
If you retire at age 65 and you earned an average of $45,000 during the last three years, you have to plan for $31,500 to maintain your lifestyle. Given that the public plans will cover 58% of that amount ($18,013), you will have to come up with the other 40% of the annual income ($13,487) yourself.
Want to get a clear picture of your situation? The retirement projection show you how much you should invest today to reach your retirement objectives, while taking into consideration your current investments, your employer's pension funds and the amounts you'll receive from publics plans.
Pension Plans
1. Source: Guide to Financial Planning for Retirement published by Question Retraite.
2. Average annual employment earnings increased each year at the same rhythm as the QPP maximum pensionable earnings ($61,600 in 2021).
3. Amounts payable from April to June 2021. The Guaranteed Income Supplement (GIS) is not taxed. To be eligible for the GIS, an individual must be age 65 and his or her income must not exceed a certain amount.
