How do VRSPs fit into Québec’s retirement system?

In the past few months, you have probably heard about voluntary retirement savings plans (VRSPs) in one of my blog posts or in the news. VRSPs were implemented last July by the Gouvernement du Québec for the 2 million employees or self-employed workers whose employer does not offer a retirement pension plan.

Since the law governing VRSPs came into force, I have been hearing comments about the pertinence of VRSPs. Several people have asked me to explain how VRSPs fit into Québec’s retirement system.

First, you need to know that the Québec retirement system has three levels representing the main sources of income in retirement:

1. the federal Old Age Security program 
2. the Québec Pension Plan 
3. private pension plans and personal savings 

In other words, our system is made up of public retirement plans (1 and 2), private pension plans and personal savings (3). Any worker who has contributed sufficiently to the public retirement plans could be entitled to benefits. In contrast, private pension plans or plans offered by employers are less accessible. In Québec, only 50% of workers are lucky enough to have access to a private pension plan at work. The other 50% must rely on personal savings only to make up the third level. Let’s be honest: it takes a huge amount of effort and an awful lot of discipline to put money aside for our golden years knowing that we could benefit from that money now.

VRSPs were created to help workers who do not have a pension plan to save in a structured way while benefitting from the advantages usually reserved for group plans. Specialists will tell you that the easiest way to save is through source deductions. VRSPs work with deductions made directly from a worker’s paycheck at a pre-set contribution rate. Another interesting advantage is that VRSP contributions are tax deductible, like RRSPs.

Although VRSPs are mainly for self-employed workers and employees who have no employer-sponsored retirement savings plan, VRSPs are also for anyone else who would like to contribute to them or to transfer their RRSPs. If you are interested, I suggest that you see the list of authorized administrators offering VRSPs.

For 2 million workers, VRSPs replace employer-sponsored retirement savings plans. The amounts accumulated in a VRSP will be added to the amounts in public plans and will allow the workers to be more comfortable in retirement. So, yes, VRSPs do have their place because everyone could use a better retirement.

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