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RREGOP: What is the reduced pension as of age 55?

RREGOP: What is the Reduced Pension as of age 55?

To receive an unreduced pension, you must meet one of the following requirements:

you must be at least age 61;
you must have accrued at least 35 years of service;
you must be at least age 60 and have an age and number of years of service that totals at least 90. This is called the 90-factor requirement.

If you would still like to receive your pension earlier, how does it work? As of age 55, you can receive a pension, but it will be reduced for life because you will receive it for a longer period of time. It will be reduced by 0.5% for each month between the moment you begin receiving your pension and the moment you would have met one of the three requirements to be entitled to an unreduced pension. It is therefore reduced by 6%, per year.

Steve's example

Steve retires at age 58. He has 29 years of service recognized for the calculation of his pension, and his average salary is $47 000. We therefore calculate the amount of his pension before the reduction by multiplying 29 x 2% x $47 000, which provides him with a pension of $27 260 per year.

Then, to calculate the reduction, we must look at when he would have met each of the three requirements to be entitled to an unreduced pension:

He is age 58, he is therefore missing three years to meet the age requirement of age 61.
For the requirement of 35 years of service, he is missing six years.
For the last requirement, he is two years short of turning age 60 and reaching 31 years of service, that is, the 90-factor requirement.

Then, we always take the lowest number of months to meet one of the requirements. Steve's shortest period is two years, that is, 24 months, to reach the 90-factor requirement. We therefore multiply 24 x 0.5%, which equals 12%. We apply this percentage of reduction to his pension. It will therefore be reduced by $3271 per year.

Steve will receive a pension of $23 989 per year, from ages 58 to 65. Once he turns age 65, his pension will decrease by $9541, which will provide him with a pension of $14 448 as of that age. The reduction is calculated the same way as the unreduced pension. Remember that age 65 is the age at which he can receive 100% of his pension under the Québec Pension Plan and the Old Age Security pension.

It is important to think carefully before deciding when to retire. In Steve's case, had he worked two more years, he would have received an unreduced pension of $30 380 per year before age 65 and then $19 747 per year as of age 65.

Is there a way to increase your pension?

As you can see, the best way to increase your pension is to continue working, for three reasons:

You will decrease the reduction of your pension.
You will increase your number of years of service recognized for calculation purposes.
You will likely increase your average salary thanks to the salary increases you will receive.

Another option is to slow down. There are measures that allow you to reduce your working hours without impacting your pension amount, even if your salary is reduced. For more information, consult the Can you reduce your working hours without impacting your pension under RREGOP? web page.

If you resign now, what are your options?

If you do not want to continue working, there are two ways you can increase your pension: apply for your pension later or transfer money into RREGOP.

Apply for your pension later

You could wait until you meet one of the requirements to apply for your unreduced pension. In the meantime, you could use your savings or work in a position outside the Gouvernement du Québec. This would completely eliminate the reduction. You could also wait, but without meeting one of the requirements: each month you wait decreases the reduction.

Transfer an amount into RREGOP

You could transfer the necessary amount into RREGOP to eliminate, in whole or in part, the reduction of your pension. The amount is set on the date you retire and determined according to certain assumptions based on interest rates, inflation, mortality, etc. The transfer of the amount must be made within 60 days following the date on which your membership ends from one of the following options:

a registered retirement savings plan (RRSP);
a registered pension plan (RPP);
a locked-in retirement account (LIRA);
a retirement allowance.

The cost of the transfer may seem high. It may be about 20 times the amount of the eliminated reduction. However, you would increase your pension, which is paid for life. Remember that the pension is partially adjusted to the cost of living each year and is partially transferable to your spouse. This means that when you die, he or she will receive part of your pension.

If you were thinking of purchasing a life annuity This link will open in a new window. with your personal savings, transferring an amount into RREGOP is an option to consider along with offers from companies that sell them.

Estimate of your pension

To help you make a decision, you can estimate the amount of your pension under RREGOP at various ages using the CompuPension tool, in addition to carrying out a complete simulation using all of your retirement income.

Remember: the most important amount to remember is the amount of the pension you will receive as of age 65, because that is the one you will receive for the longest period of time. When in doubt, seek advice!