• 1. What is conditional inflation protection?

Inflation protection for pension credit earned after 2009 is conditional on the financial health of the pension plan. After you retire, inflation increases for this portion of your pension credit will range from 50% to 100% of the change in the Consumer Price Index (CPI). Conditional inflation protection does not affect pension benefits earned before the end of 2009.

Providing 100% inflation protection remains the goal; however, the OTF and the Ontario government can use conditional inflation protection to offset future projected shortfalls in the pension fund.

• 2. How does conditional inflation protection work?

Members who retired before 2010

You will continue to receive 100% inflation protection. Conditional inflation protection does not apply to members who retired before Jan. 1, 2010. It affects only members who earn credit after Dec. 31, 2009.

Members who retire after Dec. 31, 2009

Annual cost-of-living increases will be based on two components:

1. The portion of your pension credit earned until the end of 2009 is still 100% protected against changes in the cost of living.
2. Cost-of-living increases for the portion of your pension credit earned after Dec. 31, 2009, can range from 50% to 100% of the change in the Consumer Price Index (CPI), depending on how much the plan can afford to pay.

The Ontario government and designated employers continue to share pension costs by making extra contributions equal to any cost-of-living increases members forgo due to a funding deficiency.

The combined effect of members receiving smaller cost-of-living increases and the government contributing matching funds will mitigate funding deficiencies.

• 3. Why is the level of inflation protection changing for recently retired pensioners?

Ontario Teachers’ Federation (OTF) and the Ontario government used conditional inflation protection to cover part of the 2011 funding shortfall. Beginning in 2012, pensioners who retired after 2009 will receive 60% of the annual cost-of-living increase on the portion of pension credit earned after 2009. Increases for the portion of their pension credit earned before the end of 2009 will continue to match 100% of the annual change in the cost of living.

The 60% conditional inflation level will remain in effect until a new level is set, or the existing level confirmed, when the next funding valuation is filed with the provincial pension regulator. This must happen no later than 2014.

• 4. Can you provide hypothetical examples of how conditional inflation protection works?

Here’s how conditional inflation protection could affect four fictitious members – three retired teachers and one young teacher. For these examples, we use the 2012 inflation adjustment of 2.8%.

Retired before 2010: Helen

Helen retired before 2010, so her entire pension is covered by 100% inflation protection.
If Helen's pension is $51,000, the 2.8% increase translates into an extra $1,428 a year in pre-tax income.

Retired in June 2010: Lawrence

Lawrence retired in June 2010, so he will be affected by conditional inflation protection because he has a small amount of post-2009 credit. If Lawrence retired in June 2010 with 30 years of credit (of which 0.6 years of credit is post-2009 credit) and a $51,000 pension, the 2.8% base increase translates into an extra $1,416 a year in pre-tax income.

Retired in June 2011: Wayne

Wayne retired in 2011, so not only is he affected by conditional inflation protection, but he also receives half the increase because he retired in mid-year. If Wayne collects a $51,000 pension and has 1.6 years of post-2009 credit, the increase translates into an extra $699 a year in pre-tax income.

Retiring in 2030: Aarti

Aarti is not yet affected by conditional inflation protection. Annual inflation adjustments are calculated only after a member retires, and will be based on the plan’s long-term funding health at the time. Working teachers do not accumulate a specific percentage of conditional inflation protection on their pension credit.

When she retires, cost-of-living adjustments for the portion of pension credit Aarti earned after 2009 will be from 50% to 100% of inflation, depending on the plan’s financial health at that time – not today.

Aarti had five years of pension credit when conditional inflation protection went into effect on Jan. 1, 2010. Assuming she retires with 25 years of credit, when she is retired, her inflation protection will be:

• guaranteed at 100% of the increase in the consumer price index for 20% of her pension (5 of 25 years of credit)
• dependent on the plan's financial status for 80% of her pension (20 of her 25 years of credit)

• 5. I’m a pensioner. How much will my pension increase in 2012?

The annual cost-of-living adjustment for 2012 is 2.8%. The following table shows the expected inflation adjustments that a typical pensioner can expect in 2012, depending on when they retired:

Pension	Retired before 2010	Retired in June 2010*	Retired in June 2011**
$15,000	$420	$417	$206
$20,000	$560	$556	$274
$25,000	$700	$694	$343
$30,000	$840	$833	$411
$35,000	$980	$972	$480
$40,000	$1,120	$1,111	$548
$45,000	$1,260	$1,250	$617
$50,000	$1,400	$1,389	$685
$55,000	$1,540	$1,528	$754
$60,000	$1,680	$1,667	$822
*assumption: based on 30 years of credit, 0.6 years of post-2009 credit **assumption: based on 30 years of credit, 1.6 years of post-2009 credit

• 6. Do pension payments decrease when conditional inflation protection is invoked?

No, they just won’t increase as much each year as they would with full (100%) inflation protection.

• 7. Should conditional inflation protection affect my decision on when to retire?

Conditional inflation protection should not affect your decision on when to retire. It is a permanent feature of the plan.
For example, let’s say you had 20 years of pension credit on Jan. 1, 2010, and you retire with 25 years of credit. Guaranteed 100% inflation protection will apply to 80% of your pension (20 of 25 years) and 50% to 100% inflation protection will apply to the remainder
(5 of 25 years).