Public Retirement Plans: A Guaranteed Basic Income

Public retirement plans from the federal and Québec government guarantee a basic minimum income in retirement.

Public pensions: Basic financial assistance

Canada's Public pensions  provides seniors with a basic income in retirement, regardless of whether they have worked. This program is administered by Service Canada on behalf of Employment and Social Development Canada (ESDC). It is not linked to a specific retirement fund, and it is financed through general tax revenues. It includes:

• The Old Age Security (OAS) pension

  This is the basic pension of the federal program. It is not necessary to stop working in order to receive it. The amount is determined based on the number of years of Canadian residency. To be eligible, you must:

  • be at least 65 years of age; and
  • have a legal Canadian status; and
    
  • have resided in Canada for at least 10 years since the age of 18.


• The Guaranteed Income Supplement (GIS)

  The Guaranteed Income Supplement is paid in addition to the OAS pension to seniors with low or no income. The amount is determined each year based on income and marital status. To be eligible, you must:

  • receive an OAS pension; and
  • have an annual income that does not exceed a pre-determined threshold, which is based on whether you have a spouse.


• The Allowance and the Allowance for the Survivor

  These allowances help low-income spouses aged 60 to 64 until they become eligible for the OAS pension at 65 years of age.

  The Allowance is for persons whose spouse receives or is entitled to receive the OAS pension and the GIS, while the Allowance for the Survivor is payable to widowed seniors. The amount is determined each year based on income and marital status. To be eligible, you must:

  • be 60 to 64 years of age; and
  • have a legal Canadian status; and
  • have resided in Canada for at least 10 years since the age of 18; and
  • have an annual income that does not exceed a pre-determined threshold, which is based on whether you have a spouse.

To receive a benefit under the Old Age Security (OAS) program, you must file a written application 6 months prior to the date you want to receive it.

The Québec Pension Plan (QPP): Insurance for workers

The Québec Pension Plan is a compulsory public insurance plan. Its purpose is to provide Québec workers with basic financial protection in the event of retirement, death or disability. This program is administered by Retraite Québec.

The QPP is funded by contributions from Québec workers and employers. You contribute automatically if you are 18 or older, you are working, and your annual employment income is greater than $3500.

Since 1 January 2019, the Québec Pension Plan is composed of 2 plans:

• the base plan, which has an income replacement rate of 25%
• the additional plan, which has an income replacement rate of 8.33%

The income replacement rate under the Québec Pension Plan is therefore increase from 25% to 33.33%, thereby providing higher benefits in retirement. Since the increase is gradual and is based on the number of years that contributions are made to the additional plan, persons who are now entering the labour force will enjoy the full measure of the increase when they retire, while those who are retiring in the coming years will see their benefits increase proportionally to the number of years they contribute.

In addition, since 1 January 2024, the eligible earnings cap has been gradually increasing.

• The eligible earnings cap will increase over a 2-year period, in 2024 and 2025, until it reaches 114% of the maximum pensionable earnings (MPE). This new eligible earnings cap will therefore make it possible for workers whose salaries exceed the MPE to contribute more and receive benefits proportionally to their contributions so that they may also benefit from an income replacement rate of 33.33%.

In 2024, QPP contributions correspond to 12.80% of the portion of your annual employment income between $3500 and the maximum pensionable earnings ($68 500 in 2024). If you are an employee, you pay half, and your employer pays the other half. If you are self-employed, you pay the entire amount. In 2024, the maximum contribution is $8320.00.

To receive a retirement pension

You must have contributed to the QPP, even if just for one year, and be at least age 60. Each year, your employment earnings (up to the maximum pensionable earnings) are recorded under your name in the QPP's Record of Contributors. When the time comes, the earnings will be used to calculate your retirement pension and other benefits, if applicable.

Even if you have not contributed to the QPP, if earnings were partitioned following the breakdown of a union, you could also receive a retirement pension.

The Canada Pension Plan (CPP): If you worked elsewhere in Canada

The Canada Pension Plan  is equivalent to the Québec Pension Plan and covers the other provinces and territories in Canada. This program is administered by Service Canada. If you have worked elsewhere in Canada, you have probably contributed to the CPP.

The CPP and the QPP work jointly to ensure basic protection for all contributors. Your employment income recorded under both plans (CPP and QPP) will be used to determine your eligibility for a retirement pension and to calculate its amount.

How do you apply for a pension?

If you have contributed to both plans, you must file an application based on where you live. If you live outside Canada, you must file your application based on your last province of residence. If your last place of residence was in Québec, you must send your application to Retraite Québec. Otherwise, you must send your application to the Canada Pension Plan administration.

If you worked outside Canada

Even if it was for a few months, you may be eligible for a retirement pension from the country where you worked. You may be entitled to benefits if the Gouvernement du Québec has concluded an international social security agreement with the country. Receiving benefits from another country will in no way reduce the amount of your disability pension under the Québec Pension Plan. However, certain countries may reduce the pensions paid to you if you are receiving a pension under the Québec Pension Plan or the Canada Pension Plan.

Worth knowing about...

• The Old Age Security (OAS) program provides you with a basic income in retirement even if you have never worked.
• The Québec Pension Plan applies solely to Québec workers whose annuel employment income is at least $3500.
• Workers' and employers' contributions are the main source of funding for the Québec Pension Plan. This funding method, called partial funding, is used to pay benefits, maintain a basic reserve in order to minimize the impact of economic fluctuations and significant demographic changes (for example, an aging population), and ensure the financial sustainability of the Plan.
• Unlike the Québec Pension Plan, there is no basic reserve for the OAS program. The Government of Canada finances the OAS program through its general tax revenues. The program will thus be fully exposed to the socioeconomic effects of an aging population.

• How Much Will You Receive From Public Programs in Retirement?
• Retirement Plans and Disability
• What Do Retirement Plans Provide When a Contributor Dies?