Labour Studies Index

Updated: 2022-05-16

Individual Financial Returns from Quebec Pension Plan Reform Options: Analyzing Proposals to Renew a Second-Pillar Retirement Income Program

Document type Article
Author Boisclair, David
Author Lacroix, Guy
Author Marchand, Steeve
Author Michaud, Pierre-Carl
Journal Canadian Public Policy
Volume 44
Date 2018 June
ISSN 0317-0861, 1911-9917
Pages 134-158


We use simulation methods and a detailed tax calculator to analyze the likely effects of two recent pro- posals aimed at reforming the Quebec Pension Plan (QPP): the federal proposal, eventually implemented throughout Canada, and the Quebec government’s December 2016 proposal. Accounting for education- adjusted life expectancy, earnings variability over the course of a career, and their interactions with the tax code and retirement income system, we find that internal rates of return (IRRs) for new QPP contribu- tions are similar under both reforms for individuals with lifetime average annual earnings of more than $40,000. Both reforms yield substantial IRRs for low-income individuals. Although the Quebec proposal offers higher IRRs for individuals earning less than $40,000, the federal proposal yields greater present value benefits for these same individuals. We show that if new QPP benefits were exempted from the Guaranteed Income Supplement (GIS) clawback, and provided that the working income tax benefit and GIS were not enhanced, the two reforms would yield similar IRRs for individuals with average earnings of more than $15,000. The QPP reform would thus better focus on the middle-income earners originally targeted by reform advocates.