Private retirement: what is a haircut?
Verified 12 November 2021 - Legal and Administrative Information Directorate (Prime Minister)
The amount of your retirement depends on number of quarters (old age insurance, all plans) that you have.
Depending on your year of birth, you must have number of quarters determined to qualify for a full-rate pension.
Example :
If you were born in 1960, you must have 167 quarters (41 years and 9 months) to have a full-rate pension.
If you do not have the required number of quarters, you can still receive a full-rate pension if you retire at 67.
And if you retire on this term or age, your pension is equal to 50% your average gross annual salary.
But if you retire before age 67 without the required number of quarters, the 50% is reduced by 1.25% per missing quarter.
Thus the 50% is reduced by 0.625 (50 x 1.25%) per missing quarter.
So if you retire without fulfilling the term of quarters or the age requirement, the rate that will be applied to your average gross annual salary, called haircut, will be as follows:
Missing Quarters | Retirement rate |
|---|---|
1 | 49,375% |
2 | 48,750% |
3 | 48,125% |
4 | 47,500% |
5 | 46,875% |
6 | 46,250% |
7 | 45,625% |
8 | 45,000% |
9 | 44,375% |
10 | 43,750% |
11 | 43,125% |
12 | 42,500% |
13 | 41,875% |
14 | 41,250% |
15 | 40,625% |
16 | 40,000% |
17 | 39,375% |
18 | 38,750% |
19 | 38,125% |
20+ | 37,500% |
To determine the number of missing quarters, your pension fund compares the number of missing quarters between the date of your retirement and your 67 years, and the number of quarters required for a full-rate retirement.
The number of quarters obtained is rounded up.
The number of missing quarters is the best for you.
Example :
If you were born on 1to December 1960, to have a full-rate retirement, you must either have 167 quarters or wait until age 67 (at 1to December 2027).
If you decide to leave on 1to December 2023, at age 63, having only 159 quarters:
- Between your retirement date and your 67th birthday, you will miss 16 quarters (67 - 63).
- Between your retirement date and the number of quarters required for a full-rate pension, you will miss 8 quarters (167 - 159).
The most advantageous is 8 quarters.
Your pension will be calculated on the basis of 45% (50 - 8 x 0.625) of your average gross annual salary.
It shall be equal to: average gross annual salary x 45% x 159 / 167
Reminder
if you have the necessary number of quarters but split into different basic plans, your general plan pension is calculated based on the number of quarters in that plan. Your other pensions are too, but you don't have a haircut.
- Retirement InfoPublic interest group "Union retiree"
- Social Security Pension Insurance SiteNational Old Age Insurance Fund (Cnav)