Retirement 2025: What Changes for the LIF and QPP Contributions and Why It Concerns You Right Now

You may have already heard: 2025 will mark a series of significant changes for retirement in Canada. Higher contributions, adjusted maximum income limits, more flexible LIF withdrawals… These new measures aim to make your retirement more secure and better adapted to the current economic realities. But what does this mean for you? Here’s a simple and clear overview to help you understand what to expect and how to prepare starting today.

A Fundamental Change for the LIF
Currently, the amounts placed in a LIF (Life Income Fund) are subject to annual maximum withdrawal limits depending on the account holder’s age. The goal is to ensure these funds are used in a balanced way to provide a stable income for life. However, starting in January 2025, there will be no more withdrawal limits for LIF holders aged 55 and over. In other words, you can withdraw the entire sum from your LIF whenever you want, without being limited by an annual ceiling. This change provides greater flexibility in managing your retirement, particularly in adjusting withdrawals based on your needs. You will no longer need to worry about the annual withdrawal limit and can withdraw depending on your needs, while still paying taxes on the withdrawn amounts.

Why Is This Change Important for You?
For workers in Quebec, this change offers a great opportunity to manage your LIF more strategically. By eliminating the withdrawal limits, you can better tailor your withdrawals to your financial situation, health, or the economic conditions. If you are close to retirement, you can plan more flexible withdrawals and optimize your income.

What Other Changes Should You Expect?
Here are some other key changes to be aware of starting in January 2025 concerning the LIF:

• End of the LIRA/LIF de-freezing strategy: You will no longer be able to directly transfer funds from a LIF to an RRSP. This practice, sometimes called “Flip-Flop,” will no longer be allowed.
• Transfers abroad: It will no longer be possible to transfer funds held in a LIF to another country, unless the account holder has been a non-resident for at least two years.
• Separation of accounts: Even though the withdrawal limits for those over 55 are removed, LIFs must still be kept separate from RRSPs. This ensures the priority of the spouse in the event of the account holder’s death.

Your QPP Contributions Will Slightly Increase
Starting January 1, 2025, you will contribute a bit more to the Quebec Pension Plan (QPP).

• The contribution rate for employees will rise from 5.95% to 6.25%.
• For self-employed workers, the combined rate will increase to 12.5%.

Why the Increase?
This increase is part of a plan to boost your retirement benefits. In other words, you’re contributing more today to receive a larger income in retirement.
Concrete Example:
A worker earning $60,000 per year will contribute about $15 more per month. In the long run, this means higher retirement payments to help you cope with the cost of living.

The Maximum Pensionable Earnings (MPE) Will Be Adjusted
In 2025, the MPE, the income ceiling on which you contribute to the QPP, will be adjusted to reflect salary growth.

• The MPE will rise from $68,500 to $73,200.
• A new additional threshold will be added for income exceeding $73,200.

What Does This Change?
If you earn more than the current MPE, you will be able to contribute on a larger portion of your income. The result? Enhanced retirement benefits.

More Flexibility for RRIF Withdrawals
The Registered Retirement Income Fund (RRIF) will also be adjusted in 2025:

• The minimum withdrawal rates will be recalculated to better reflect increased life expectancy.
• A new measure will allow you to temporarily freeze your withdrawals in difficult economic situations.

What Does This Mean for You?
You will have more control over managing your withdrawals, helping you avoid depleting your savings too quickly. This is great news for those who want to maximize their retirement funds in the long term.

What Should You Do to Adapt?

• Evaluate your current contributions
  If you are an employee or self-employed, take the time to assess how the increase in contributions will impact your budget. Plan accordingly to avoid surprises.
• Focus on complementary saving strategies
  The QPP is a great tool, but it only covers part of your retirement needs. Supplement your contributions with investments in an RRSP or TFSA to further secure your future.
• Adapt your retirement projections
  With the new RRIF rules, it’s time to review your withdrawal plan. Consult with an advisor to optimize your funds and take advantage of this new flexibility.

Plan for the Future with MCB Group
These changes are an opportunity to reassess your retirement strategy and make the most of it. Whether you’re early in your career, nearing retirement, or already retired, it’s essential to stay informed and proactive.
The experts at MCB Group can help you:

• Maximize your contributions based on the new rules.
• Optimize your RRIF withdrawals to extend your savings.
• Create a personalized savings plan tailored to your specific needs.

In Brief
The adjustments coming in 2025 provide practical solutions for a more generous and flexible retirement. Yes, you’ll contribute a little more, but you’ll also receive more when you need it most.

Don’t wait to act: plan today to ensure a comfortable future. Contact an MCB Group advisor for a free initial consultation and take the lead on these changes!

Your retirement deserves a winning strategy. Plan wisely with MCB Group.