Your CAAT pension includes conditional inflation protection increases
Inflation refers to the increase in the prices of goods and services over time. Pension plans can help offset the negative impact of inflation by providing inflation protection, in the form of periodic increases to the amount of a pension payment. These increases help reduce the erosion of buying power caused by inflation.
In the CAAT Plan, when members retire, their initial pension payment is called the "lifetime pension." Inflation protection, when it is granted, is added to the lifetime pension each year that the Consumer Price Index (CPI), a widely-used measure of inflation in Canada, has increased. The new amount is the new lifetime pension. In other words, inflation protection is cumulative. Once inflation protection has been paid, it is a permanent addition to your retirement income.
The CAAT Plan inflation protection rate for 2024 is 3.58%
Each year in December, retired members are sent a letter detailing the increase to their pensions (if any) for the upcoming year. The letter will show the amount of the inflation protection increase, the gross pension payments after any inflation protection increases have been applied, any adjustment for income tax, and the net payment as of January 1 in the following year.
The inflation protection that may be applied to your pension is based on when you earned your pension.
Conditional inflation protection means increases are conditional on affordability – the Plan’s funded status must be at level 2 and above on the Funding Policy. The most recent valuation guaranteed funding for inflation protection until at least January 1, 2025.
In the CAAT Plan, inflation protection is calculated based on changes to the previous year’s Consumer Price Index (CPI). The CPI, calculated by Statistics Canada, is considered a reliable measure of inflation.
The annual rate is calculated using a method called the “average method.” The average CPI for the 12-month period ending in September of the current year is compared to the average of the 12-month period ending in September of the previous year. The inflation protection increase paid by the Plan is equal to 75% of the percentage change in the two averages of CPI.
The maximum increase in a year is 8%. In years when inflation is high, any amount above the 8% would be carried forward and applied to inflation protection in following years. This carry forward is referred to as “banking.” If there is no increase in the September CPI of a given year, there will be no increase to pensions in the following year.
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