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FAQ - Indexation

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Indexation

Member Handbook -
Pension Indexing

Pensioner FAQ -
Indexation

What are your options and entitlements?

What is Indexation?

Indexation is also called inflation protection. It is an annual process in which your pension may increase in accordance with some part of the previous year's increase in the Consumer Price Index (CPI). The CPI is considered a reliable measure of inflation, and indexation is designed to protect the value of your pension from eroding due to inflation.

Who qualifies for Indexation?

For service earned in the Plan prior to January 1, 1992, indexation will be granted until December 31, 2014. Indexation relating to these years is not funded past 2014.
For service earned in the Plan between January 1, 1992 and December 31, 2007, indexation is funded and will be paid for life.
For service earned in the Plan after December 31, 2007, indexation is “ad hoc” - it will be granted only if there are sufficient funds in the Plan to do so. The CAAT Plan governors will review the funding of the Plan on a yearly basis to determine if indexation will apply in a given year. This change was part of the Plan’s Funding Policy, which was approved in September 2006.

How is Indexation calculated?

Currently, the annual increase is equal to 75% of the increase in the Consumer Price Index in September of the current year from September of the previous year - a snapshot of prices in two months, a year apart. There is a Plan amendment in place to change the measurement to a comparison of the average of the CPI increase over all 12 months. The calculation would continue to be done at the end of September, with the 12 month period being October of the previous year to September of the current year. However, this change will take effect only when the new method produces a higher indexation increase than the old method, which has not happened yet.

The maximum increase in a year is 8%. In years when inflation is high, any amount above the 8% is carried forward and applied to indexation in following years. This carry forward is referred to as "banking." In recent years, when inflation has been low, the increase has rarely risen above 2%. If there is no increase in the September CPI of a given year, there will be no increase to pensions in the following year.

When Members retire, their initial pension payment is called the "lifetime pension". Indexation, when it is granted, is added to the lifetime pension each year that the CPI has increased, and the new amount is the new lifetime pension. In other words, Indexation is cumulative. Survivor pensions are also indexed.

Is the Bridge Benefit indexed?

When Members retire before age 65, they receive both a lifetime pension and a Bridge Benefit payable to age 65. The Bridge Benefit is indexed the same way as the lifetime pension. However, indexation granted to the Bridge Benefit stops along with the Bridge Benefit itself at age 65.

January 2009