Highlights of the Actuarial Valuation of the Québec Pension Plan as at 31 December 2021
The
Actuarial Valuation of the Québec Pension Plan as at 31 December 2021 serves to inform the government, contributors and beneficiaries of the financial situation of the Québec Pension Plan (QPP). It provides an overview of the
QPP's health.
The
QPP is made up of 2 components:
- the
base plan, which came into force in 1966
- the
additional plan, which came into force in 2019, within the framework of the
enhancement of the Plan.
Distinct projections are carried out for the base plan and the additional plan using assumptions and demographic and economic data, as well as data regarding benefits.
The document provides a projection of the
QPP's cash inflows and outflows for the next 50 years, that is, from 2022 to 2071. It also includes a projection of the base and additional plans' reserves and the calculation of the
QPP's funding indicators.
Highlights
The Québec Pension Plan is financially sound.
The steady-state contribution rate and the reference contribution rate are lower than the
statutory contribution rates.
Under the base plan and the additional plan,
cash inflows are sufficient to fund cash outflows for each of the 50 years in the projection period.
Base plan
Additional plan
The
statutory contribution rates apply to the total contributory payroll of all persons who work in Québec.
The
steady-state contribution rate is the base plan's funding indicator, and the
reference contribution rate is the additional plan's funding indicator.
Main observations for the 3 past years
The reserve as at 31 December 2021 is greater than expected
- The base plan's reserve is greater than expected mainly due to investment gains of 14 billion dollars.
- The reserve has reached
103 billion dollars, which corresponds to the total cash outflows for 6 years.
Limited effect of the COVID-19 pandemic in the short‑term
Despite fluctuations, the contributions collected were comparable to the projections for 2020, and higher by one billion dollars for 2021.
Postponement of applications for a retirement pension
Less applications for a retirement pension were filed at age 60. Pension payments starting before age 65 are reduced for being paid early. Since more persons will file their application later, the amounts paid to new retirement pension beneficiaries will be higher on average.
Update to the projections
Funding of the
QPP and the projections presented in the actuarial valuation of the Plan are part of a long-term view. However, certain elements were adjusted to better reflect the particular context in which this valuation was prepared:
- the short-term projection of the indexation of pensions was increased
- the expectations regarding future returns were lowered.
Funding and risk factors
Funding of the base plan depends mainly on changes to the contributory payroll, whereas funding of the additional plan depends more on its financial assets. Due to this difference, the results for the base plan and for the additional plan are not influenced in the same way by demographic and economic factors.
The additional plan's reserve is increasing quickly. Based on the projections presented in the current actuarial valuation, the additional plan's reserve will surpass the base plan's reserve in 2055. The greater a retirement plan's reserve is with regard to funding, the more investment income variations can influence its financial situation.
To monitor in the long‑term
- economic and geopolitical instability
- changes in the labour force
- climate change
- evolution of longevity.
Documents