The Pension and Benefits Committee was asked by delegates to the 2018 BCRTA AGM to examine the way the Cost of Living Allowance (COLA) is calculated and applied to our pensions. The concern was that perhaps our pensions’ purchasing power was falling behind because the BC Teachers’ Plan Pension Board of Trustees uses the Canada Consumer Prince Index (CPI), and that might not reflect the actual rising costs here in BC. The committee has looked at various alternatives including using the BC Consumer Price Index, the Vancouver or Victoria CPI or an alternative calculation.
Thanks to the research by Al Cornes, there is a clear explanation of the history of how we first achieved cost of living adjustments, which is particularly interesting.
The key question we looked at was, “Would we have higher pensions if we moved to using an alternative CPI?” If you look only at the 2017 increase to our pensions the answer would be yes. In January 2018 our pensions increased by 1.6% which was the increase in the Canada Consumer Price Index, recorded in September, over the previous year. The BC CPI for the same period of time was 2%. This looks like the value of our pensions has fallen.
However, there is danger in looking at only a one year time frame and forming a conclusion. Quite a different picture emerges if you look at the data over a longer period of time. We discovered that using the Canada CPI rather than the BC CPI had the effect of increasing our pensions by almost 5% in the past 10 years – a gain of .465% each year. And looking over an even longer 30 year period we found that using the Canada CPI gave us a very significant 10% increase in our pensions compared to using the BC CPI. This is because the rates of inflation in some provinces, Ontario and Alberta specifically, have been much higher than the rate in BC with the result of lifting the Canada CPI’s average, to the benefit of our BC pensions.
The committee did not feel it was appropriate for the Pension Trustees to use a particular city’s CPI for several reasons. City-specific indices are more volatile and are not a reliable indicator of inflation for a larger area; they can be dependant on a specific economic condition such as the gain or loss of a large employer. Nevertheless, we found the same advantage; using the Canada CPI over the past 15 years increased our pensions by 3% over the Vancouver CPI and 7% over the Victoria CPI.
The committee did not find another inflation measuring instrument that met the test of independence, accuracy and a long history of use. These criteria are all met by the respected Canadian
Consumer Price Index. Therefore, the Committee is recommending that we do not advocate for changes to the current practice.
Click here to see the full report.
On behalf of the Pensions and Benefits Committee,