What happens to your pension after you retire?
Inflation protection – annual increase
Every January your pension, or that of your survivor, is adjusted for the increase in the cost of living. The adjustment is applied the year after you start to receive a pension. The first adjustment is pro-rated for the length of time you received a pension in the previous year. The inflation adjustment reflects the increase in the cost of living in Canada (as measured by the Consumer Price Index). It is calculated by dividing the Consumer Price Index average for the two 12-month periods ending the preceding September. For example, the 2011 inflation adjustment was calculated as:
|October 2009 to September 2010 = 115.8||= 1.4%|
|October 2008 to September 2009 = 114.2|
The maximum increase in any one year is 8%. Any increase above 8% is carried forward into the next year, when the adjustment is less than 8%.
EXAMPLE OF PENSION WITH PRO-RATED INFLATION INCREASE:
Terminated from Plan
Number of months on pension
OPTrust inflation adjustment for 2011
How to calculate your pro-rated 2011 increase:
number of months on pension, divided by 12 x increase in CPI for 2011
= your 2011 adjustment
(9 ÷ 12 x 1.4% = 1.05%)
In January 2011, your pension would be increased by 1.05% to reflect the cost of living for nine months. In following years the full CPI increase (up to 8%) in any given year is applied.
Inflation Protection Chart
This chart shows how the inflation protection feature of the OPSEU Pension Plan works. The graph plots the growth of an average pension over a 9-year period from 2003.