The Learning Centre:
Inflation protection + pension credit + changes = WHAT for you?
Surplus funds will help restore inflation protection for post-2009 pension credit.
For those of you paying into the Ontario Teachers’ Pension Plan (OTPP), or if you’re retired and collecting your OTPP income, then you’ve most likely heard the recent news that a funding surplus will be used to partially restore cost of living increases for the portion of pensions earned after 2009.
Specifically, inflation protection will increase from 60% to 70% of the annual cost of living for post-2009 pension income earners.
If you happen to fall into this particular group of retired education members, how exactly will this change affect you? And what about those who retired before that timeframe? Then of course there’s the group of educators who just retired at the end of the 2014-2015 school year and the ones who are yet to retire sometime in the future. Will this change have an impact on any of them?
To answer that question, let’s break down the effects of this change (if any) on those four groups:
|If you retired before 2010:||No effect. You will continue to receive an annual pension increase equal to 100% of the annual increase in the Consumer Price Index (CPI).|
|If you retired in 2010-2014:||Your pension will be restored to the level it would be at if 100% inflation protection had been provided each year since you retired (for example, if Maria’s gross annual pension is $49,980, but would have been $50,000 with full inflation increases, she will receive a $20 boost in her pension beginning in January 2016). There is no retroactive payment associated with the increase.
On top of the restoration of inflation increases, you will receive an annual pension increase, as usual. In 2016, the increase will equal 70% of the annual increase in the cost of living for the portion of your pension earned after 2009 (up from the current level of 60%). The portion of your pension earned before 2010 continues to fully keep pace with changes in the cost of living (as based on changes in the CPI).
|If you retired this year (2015):||Starting in January 2016, you will receive a pension increase equal to 70% of the annual CPI increase for the portion of your pension earned after 2009, plus 100% for the portion of your pension earned before 2010. Your first pension increase will be prorated from your last day of credit in 2015.|
|If you are still working:||No effect since inflation increases are determined after you retire.|
Besides your pension, how are your other financial plans for retirement income coming along?
Educators Financial Group can help you identify any potential pension income gaps to ensure you live the kind of retirement you want. Talk to us. Our financial specialists are salaried, so there’s no high-pressure commission sales tactics—only genuine educator-specific advice on the financial matters that concern you.
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The information in this article is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual.