Pension Life - Winter 2020
Your 2020 cost-of-living adjustment is 1.9 per cent
As a retired member of the Municipal Pension Plan, effective January 1, 2020, you received a 1.9 per cent cost-of-living adjustment to your pension.
This COLA provides you with some inflation protection while the cap maintains the long-term sustainability of the inflation adjustment account (IAA), which funds these adjustments. COLAs are not guaranteed; however, once a COLA is granted, it is applied to your lifetime pension (and to your bridge benefit and temporary annuity, if applicable).
Each year, the board carefully reviews several factors to decide whether to grant a COLA and, if so, its value. The plan rules and funding policy state the following about granting a COLA:
- Cost can’t exceed the funds in the IAA
- Amount can’t be higher than the increase in the Canadian consumer price index (CPI)
- Maximum amount can’t be greater than the COLA cap
Where does the money for COLAs come from?
When you were working, both you and your employer contributed toward your pension. Most of those contributions went into the basic account, which funds your lifetime pension; however, some went into the IAA, which is made up of your contributions, employer contributions and returns on investment. Money in the IAA is used for funding COLAs.
What is the CPI?
The Canadian consumer price index is an indicator of changes in consumer prices paid by Canadians. The CPI is generated by Statistics Canada, which measures about 600 goods and services every month. In the 12 months ending September 2019, Statistics Canada determined the average price of those 600 goods and services increased 1.9 per cent from the previous September.