A reader asked us if it’s possible to waive contributions to the Quebec Pension Plan (QPP) if you’re retired and still working. The regulations could change in this regard.
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You start contributing to the QPP at age 18, provided you have an income from work. You stop one month before you start paying an old-age pension (retirement plan or company pension plan) or before the month of your 70th birthday.
There is one general exception, however, says Daniel Harissa, financial security advisor and vice president of financial management at Waltr. In fact, if gross labor income is less than $3,500 per year, there is no need to contribute to the QPP.
The Good Side of Participation
You should know that before the age of 70, as long as you continue to work and earn more than $3,500, you must contribute to the QPP, even if you are already retired and have a pension, for example. The benefit is that it helps improve the QPP pension in the future.
Another possible scenario: you are already receiving the QPP, but because you are employed you still have to contribute. As in the previous situation, these additional contributions allow you to improve your pension when you leave the labor market for good. This is known as the Old Age Pension Supplement and is automatically added to your QPP pension until the end of your life. Payment will be made from January 1st of the year following the year in which you deposited.
Make up for lost months
If you are in a disability situation, you will no longer pay contributions to the QPP, which may affect the pension you are entitled to when you claim the pension or when you reach your 70th year. However, these months are not taken into account when calculating our pension.
Daniel Harissa points out that if you continue to work after retirement and continue to contribute to the QPP, you can make up time lost during the disability and replace the missing months.
In addition to the disability situation, the same applies to the months that you received family benefits from Quebec and Canada for a child under the age of seven on your behalf. Here, too, you can compensate for the lost months by continuing to make contributions to the QPP even after retirement.
A big change
In the last provincial budget, the government announced something new aimed at encouraging experienced workers to remain in the labor market longer. It is now possible to defer the QPP to age 72 instead of having to apply for it no later than age 70. Also the postponement of the QPP will help improve our pension going forward.
If you wish, you can also stop paying contributions from the age of 65, even if you are still active in the labor market. This measure will apply from 2024.
- The maximum pensionable earnings represent the maximum gross income from which the QPP is deducted. In 2022 it is $66,600 and this amount is indexed every year.
- Gradual retirement is possible from the age of 55, but before the age of 70. However, these years of reduced income will negatively impact the amount of QPP you receive upon retirement. To remedy this, you can arrange with your employer to continue deducting the same amount of QPP from your salary as when you were receiving your full salary.
- The self-employed and entrepreneurs who pay a salary themselves cannot benefit from this measure.