Seven things you should know about conditional inflation protection
December 21, 2011
Although conditional inflation protection was introduced in 2008, this will be the first year that some pensioners will see its effects. Here's a recap of some of the key points you should know.
- Your Teachers' pension includes annual cost-of-living increases to help you maintain your purchasing power in retirement.
- Conditional inflation protection means that:
- The portion of your pension credit earned until the end of 2009 is 100% protected against increases in the cost of living, as measured by the Consumer Price Index (CPI).
- The level of inflation protection provided for the portion of your pension credit earned after 2009 will depend on the funded status of the plan. Annual cost-of-living increases for pension credit earned after 2009 will be between 50% and 100% of the change in Consumer Price Index, depending on the plan's funding position.
- The Ontario Teachers' Federation (OTF) and Ontario government, which jointly sponsor the pension plan, introduced the concept of conditional inflation protection in response to the 2008 funding shortfall.
- Last year, the plan sponsors invoked conditional inflation protection at 60% to address the 2011 funding shortfall.
- 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.
- Conditional inflation protection only affects you when you retire. If you are a working teacher, you do not accumulate a specific percentage of conditional inflation protection on your pension credit. The act of invoking 60% conditional inflation protection for three years has no effect on the future cost-of-living increases that working teachers will receive.
- The Ontario government and other employers that participate in the Teachers' pension plan will make extra contributions to the pension plan equal to the total cost of annual inflation increases that retirees forgo.