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 2005 inflation adjustment was calculated as:
October 2003 to September 2004 = 123.9 |
|
|
=1.7% |
October 2002 to September 2003 = 121.8 |
|
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 pro-rated pension:
| Terminated from Plan |
March 2004 |
| Pension began |
April 2004 |
| Number of months on pension |
9 (April - December) |
| CPI increase for 2003 |
1.7% |
How to calculate your 2005 increase:
(number of months on pension, divided by 12) x increase in CPI for 2003
= your 2005 adjustment
(9 ÷ 12 x 1.7% = 1.275%)
In January 2005, your pension would be increased by 1.275% 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.
This chart shows how the inflation protection feature of the OPSEU Pension Plan works. The graph plots the growth of an average pension over an 12-year period from 1994.
|
