We use simulation methods to analyze the impacts of the most recent proposals to reform the Quebec Pension Plan – those put forward in June, 2016 by the Quebec and Canadian governments. Accounting for uneven life expectancy by level of education, earnings variability, and interactions with the tax and retirement income systems, we compute internal rates of return (IRR) for 78 types of individuals. The actual rate of return on new contributions is comparable to that of other financial products. Although IRR are comparable for individuals earning more than $25,000 on average under the two proposed reforms, the federal proposal yields higher income replacement rates and provides more attractive IRR for individuals with earnings at the bottom of the distribution.
Publication Authors: David Boisclair, Simon Brière, Guy Lacroix, Steeve Marchand and Pierre-Carl Michaud
Scientific Publication: Canadian Public Policy/Analyse de politiques, 44(2), 134-158. doi.org/10.3138/cpp.2017-038.