Individual financial returns from Quebec pension plan reform options: Analyzing proposals to renew a second-pillar retirement income program

Abstract

We use simulation methods and a detailed tax calculator to analyze the likely effects of two recent proposals aimed at reforming the Quebec Pension Plan (QPP): the federal proposal, eventually implemented throughout Canada, and the Quebec government's December 2016 proposal. Accounting for education-adjusted life expectancy, earnings variability over the course of a career, and their interactions with the tax code and retirement income system, we find that internal rates of return (IRRs) for new QPP contributions are similar under both reforms for individuals with lifetime average annual earnings of more than $40,000. Both reforms yield substantial IRRs for low-income individuals. Althou..