Inflation protection for your OPTrust pension

Last revised: November 2009
Printer Friendly Version: PDF

Every January, your OPTrust pension is adjusted for the increase in the cost of living, as measured by the Consumer Price Index (CPI), reported by Statistics Canada. The result is protection for the buying power of your pension – and security for the future.

The CPI used by OPTrust reflects the cost of a weighted basket of over 600 goods and services that are typically purchased by Canadian consumers every month. These weights ensure that a 10% price increase in rent, for example, would have a greater impact on the index than a 10% increase in the price of milk.

How your annual adjustment is calculated
Starting January 2010, OPTrust pensions will increase by 0.5%. The annual increase applies to all OPTrust pensioners, survivor pensions and to the deferred pensions of former and divested OPTrust members.

OPTrust’s annual inflation adjustment is calculated based on changes in the average CPI for two 12-month periods ending the previous September. For example, the 2010 adjustment is calculated using the following formula:

The maximum escalation in any single year is 8%. Any increase above this level is carried forward and applied in the next year in which the adjustment is less than 8%.

The 2010 increase is lower than in previous years. This is largely due to a drop in prices for energy products such as gasoline, which was lower in 2009 than in 2008. According to Statistics Canada, of the eight major components in the CPI, three recorded declines in the 12 months up to September: transportation, shelter, and clothing and footwear.

What’s more, inflation dipped below zero last summer – the first time in 15 years.
Since OPTrust uses an average CPI over the two 12 month periods, the approach better protects your inflation adjustment for the periods when inflation fell below zero in 2009. 

Lifetime protection
Even with a lower increase, OPTrust’s annual inflation adjustment can make a big difference over time. For example, a pensioner who retired in 1995 with an average pension of $20,000 will receive $26,618 from OPTrust in 2010.

To find out how your OPTrust pension will increase in 2010, check out your Pensioner Information Change Statement available through your Online Services account or in print in early January, 2010.

Increase pro-rated for new pensioners
For OPTrust pensioners who retired in 2009, your inflation adjustment is pro-rated for the length of time you received a pension. For example let’s say Walter retired in June 2009, his pro-rated adjustment is calculated by the number of months he received a pension, divided by 12, times the 2010 increase.   
      
  

In January 2010, Walter's pension will increase by 0.25% to reflect the cost of living for six months. In the following years the full CPI will be applied to Walter's OPTrust pension.

Deferred pensions protected

Pensions of divested and deferred members are also covered by the Plan’s inflation protection feature. In these cases, your deferred pension entitlement is calculated as of the date you ended your membership or were divested from the Plan. Your cost of living adjustments are accumulated starting from the next month and applied annually to provide protection from inflation while you wait for your deferred pension payments to start.

Deferred members receive a letter every January announcing annual adjustment. The increase is reported on divested members’ Annual Pension Statements mailed every spring.

Consumer Price Index
The Consumer Price Index (CPI) is a measure of price movements, produced by Statistics Canada. The CPI is calculated by comparing the retail prices of a representative “shopping basket” of goods and services at two different points in time. This “shopping basket” includes a range of goods and services including food, fuel, transportation, home energy and shelter. For more information on the Consumer Price Index, visit the Statistics Canada website at www.statcan.gc.ca.

Return to top of page