QPP Actuarial Valuation | Finance and Investment

Before presenting some specific results of the evaluation, it should first be noted that QPP is still in excellent financial condition.

Contribution rates

First, note that the estimate uses currently known contribution rates for the entire forecast period:

  • Basic plan: 10.8% rate on earnings between the $3,500 gross exclusion and the Maximum Pensionable Earnings (MPE), which is $66,600 in 2023;
  • 1er bonus component: rate set at 2.0% on earnings between $3,500 gross exclusion and Maximum Eligible Earnings (MPE) through 2023;
  • 2e bonus component: a rate of up to 8.0% on earnings between Maximum Pensionable Earnings (MPE) and Maximum Supplemental Pensionable Earnings (MSPE) from 2025;

The evaluation provides two results:

  • Basic plan: Fixed state contribution rate[1] It is 10.54% of the main plan. Since this break-even rate is lower than the current contribution rate (10.80%), there is no need for an automatic adjustment of the contribution rate. It should be noted that this balance contribution was 10.61% during the actuarial evaluation as of December 31, 2018.
  • Additional plan: Reference contribution rate[2] is 1.85% of additional plan. As this reference rate is lower than the forecast rate in 2023 (2.0%), there is no need for automatic adjustment of the contribution rate. Note that this reference contribution rate was 1.84% in the actuarial assessment of December 31, 2018.

In short, the already known contribution rates will not increase in the short term. However, it should be noted that the individual’s contributions will continue to increase during the transition phase, when the annual increase in MPE and the rate of contribution to the second additional component will increase to reach the final level in 2025.

Reserve

The evolution of QPP stock is a very good indicator of its financial strength. Here are some results of the actuarial assessment:

  • As of December 31, 2021, the total reserve is equivalent to $106 billion ($73 billion at the end of 2018);
  • Cash inflows (contributions and investment income) are sufficient to finance cash outflows for each of the 50 years of the forecast period (so up to 2071). This means that it is estimated that there is no need to use the reserves during these 50 years;
  • The base plan reserve is projected to increase from $103 billion as of December 31, 2021 ($73 billion as of December 31, 2018) to a projected $847 billion at the end of 2071;
  • The Supplemental Plan reserve is expected to grow from $3 billion as of December 31, 2021 to a projected $954 billion at the end of 2071. The Supplemental Plan stock is estimated to exceed the Base Plan in 2055.

Other findings

  • Interestingly, the life expectancy used at the start of the forecast is slightly lower than that predicted during the previous assessment (2018) due to the COVID-19 pandemic, but the expected longevity is comparable to that estimated in 2018. previous assessment.
  • Finally, note that the MGA, which was $66,600 in 2023, is projected to reach $259,600 in 2071…

At the end

That the financial health of the plan is so robust is great news for Quebecers. Finally, note that even if the assessment only covers the next 50 years, this does not mean that it will be a disaster after that. The level of reserves projected in 2071, totaling $1.801 billion, should also be reassuring. Even in constant dollars, it’s still 637[3] billions of dollars today or 6 times the current stock!

Martin Dupras, asa, Pl.Fin., M.Fisc, JSC
Member of IQPF
ConFor Financiers Inc.

January 2023

[1] This rate basically reflects the contribution rate needed to keep the Basic Plan afloat.

[2] This is the contribution rate that allows you to build up a reserve for a supplementary plan.

[3] Using the 2.1% IQPF Inflation Benchmark

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