Inflation Protection: 5 things every pensioner should know

The CAAT Plan inflation protection rate for 2012 is 2.14%. This is the amount by which your CAAT Plan pension has increased as of January 1, 2012. Read more...

1) Inflation protection is 75 % of the increase in the average CPI, when granted

When granting inflation protection, the CAAT Pension Plan increases pensions by 75% of the annual increase in the Consumer Price Index (CPI). The Plan calculates the annual increase by comparing the average CPI for the 12-month period ending in September of the current year to the average of the 12-month period ending in September of the previous year.

The annual inflation rate for the past 10 years has averaged about 1.8 %. The 2010 increase to pensions for inflation was 1.05 %. On an annual pension of $22,500, the increase is $236 per year or about $20 monthly.

2) Inflation protection is linked to contribution levels during specific periods and the funding level

The inflation protection you receive on your pension is tied to the periods in which you worked and contributed to your CAAT Pension and to the Plan’s funding level as outlined below:

Service before 1992 – Ad hoc inflation protection
Ad hoc inflation protection on service earned before 1992 is an ancillary benefit designed to be paid when sufficient surplus permits.  It is not a benefit funded through member and employer contributions.  Past funding surpluses enabled the Plan to pay ad hoc inflation protection increases to retired members in every year but one since 1967.

Service from 1992 to 2007 – Guaranteed inflation protection
In 1992 the contribution rate was increased significantly to provide a guaranteed inflation protection benefit. Inflation protection on service earned during this period was funded through a member contribution rate increase of 1.6 % of earnings, matched by the employers.

Service after 2007 – Conditional inflation protection
In 2006 the Plan instituted a Funding Policy to help the Sponsors articulate the Plan’s goals and funding priorities. The Funding Policy identifies the various priorities the Plan must follow to ensure security of benefits and contribution stability. The policy was designed to be fair and equitable to all members. As part of the policy and in keeping with the funding challenges of the day, the Plan introduced a third service period for inflation protection coverage. Inflation protection on service after 2007 ceased to be guaranteed and became conditional on affordability. Paying conditional inflation protection is the first use of any available surplus because contributions are much higher than in the pre-1992 period.

3) Inflation protection is in place and funded for each year to 2014

All CAAT pensioners will receive inflation protection at 75 % of the increase in the average CPI on all service until 2014.

4) In all cases, inflation adjustments are cumulative and permanent. Retired members will never see a reduction to their pensions.

The amounts which have accrued from past increases for inflation protection are permanent. Pensions cannot be reduced.

5) The CAAT Pension Plan is managed for long-term security

The goals of the CAAT Pension Plan are to ensure benefits are sustainable over the long term, and contribution rates are stable and appropriate for the benefits being earned, while maintaining fairness for intergenerational equity and providing open and transparent communications to Plan members and stakeholders.