How do cost-of-living increases to my pension work?

Every year the Teachers’ Pension Board of Trustees look at the September Consumer Price Index (CPI) for Canada. The September CPI measures inflation over the year – from September 2016 to September 2017. Then, if there is enough money in our Inflation Adjustment Account, the Trustees grant an increase to our pensions equal to the September CPI. The CPI for this past September was 1.6% and since our Inflation Adjustment Account is in a healthy position we expect that announcement from the Trustees soon.

The 2016 cost of living increase in our plan was 1%. The full cost of that increase was $106.2 million. When cost of living increases are made, those increases become part of our lifetime, guaranteed pension. That $106.2 million doesn’t just pay for the increased pensions during 2017, it pays for that 1% increase until each of the current retirees pass away.

This year’s cost of living increase will likely cost about $170 million and again, that will buy the 1.6% increase to all pensions currently in pay, guaranteed until each of us join the choir eternal.