What Kind of Pension Plan is RREGOP? Early Career
If you work for the Gouvernement du Québec, either in the health and education sectors, or a department or an agency, you have a pension plan! It probably is the Government and Public Employees Retirement Plan (RREGOP).
RREGOP funding
You have no choice but to become a member: it is mandatory. The plan is funded equally by workers like you and your employer, that is, the government. Therefore, 50% of the money used to pay your retirement pension comes from you and 50% from your employer.
How your contributions work
If you look at your payslip, you will see the amount of money you pay to finance your retirement, that is, what you contribute to your plan. For example, if you earn $50 000 per year, you contribute around $2600 into RREGOP. This is not tax: it is money set aside for your retirement. The percentage deducted from your salary for your pension plan is the contribution rate. This rate is reviewed regularly to keep the plan in good health, that is, to ensure that the plan will always have the funds necessary to pay the pensions promised for the future.
Your contributions reduce the income on which you pay taxes, similarly to an RRSP, as we saw on the webpage on TFSAs, FHSAs or RRSPs, in the Early career section. However, you will not receive a tax refund thanks to your contributions because the tax taken from each pay is adjusted accordingly. Actually, if you did not contribute to your pension plan, you would pay more tax.
You can consider your employer's contribution to your retirement as part of your total salary. Obviously, this is not money you can access immediately, but consider that it means you have to save less for your retirement. The longer you work for the government, the less you will need to save to maintain your standard of living in retirement. This money is what you need for your retirement. If it was not mandatory, automatic, and matched by your employer, would you save as much? If not, you would have to make up for lost time later on to successfully finance your retirement.
What will you receive in retirement?
Basically, the pension you will receive will depend on your average salary before retirement and your number of years of service, that is, how long you worked for the Gouvernement du Québec. The more years of service you accrue, the higher your pension will be. You will be able to receive your pension when you meet one of the following three requirements:
- You are age 61.
- You have accrued at least 35 years of service.
- You are at least age 60, and the sum of your age and years of service equals 90.
If you would like to retire before meeting one of the requirements, you can choose to receive a reduced pension for life as of age 55. Your pension will be reduced because you will receive it for a longer period of time. Therefore, ideally, you should wait until you are eligible for your full pension.
Defined-benefit pension plan
The best thing about your pension plan is that your pension can easily be estimated in advance! RREGOP is a defined-benefit pension plan, which means the pension amount you will receive does not depend on the returns generated from the contributions you made. Instead, your pension varies based on a predetermined formula.
The pension is paid for life, that is, until your death, and is adjusted in part based on the cost of living every year. When you die, your spouse may receive a pension. If you do not have a spouse, your heirs may receive money.
To get an idea of what you could receive in retirement if you continue to contribute to RREGOP, consult your Statement of Participation under RREGOP in My Account.