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Indexing Explanation

The indexing of public service pension plan benefits is governed by two pieces of legislation; the Public Service Superannuation Act (PSSA) and the Supplementary Retirement Benefits Act (SRBA).

Pension increases for retired members and their survivors are calculated each year using Consumer Price Index (CPI) data published by Statistics Canada. In accordance with the SRBA, the increase is based on a comparison of the twelve-month average of the monthly CPI for the year just ended, to the twelve-month average of the monthly CPI for the previous year. The SRBA specifies that the twelve-month period from October 1 to September 30 is to be used to calculate the increase payable the following January. The index used for the calculation is the CPI for Canada for All Items (not seasonally adjusted).

As an illustration, outlined below are the data used to calculate the pension increase of 0.5% for 2010.

Month/Year CPI* % Month/Year CPI* %
October 2007 111.6 October 2008 114.5
November 2007 111.9 November 2008 114.1
December 2007 112.0 December 2008 113.3
January 2008 111.8 January 2009 113.0
February 2008 112.2 February 2009 113.8
March 2008 112.6 March 2009 114.0
April 2008 113.5 April 2009 113.9
May 2008 114.6 May 2009 114.7
June 2008 115.4 June 2009 115.1
July 2008 115.8 July 2009 114.7
August 2008 115.6 August 2009 114.7
September 2008 115.7 September 2009 114.7
Total 1,362.7 Total 1,370.5
Monthly Average 113.6 Monthly Average 114.2

* The Consumer Price Index, September 2009, Statistics Canada, Catalogue no. 62-001-XPE, monthly.

The pension increase (indexing rate) for 2010 is the percentage increase in the monthly average CPI. This is calculated by subtracting the monthly average for the first period (Oct/07 to Sep/08) from the average for the second period (Oct/08 to Sep/09), then dividing this amount by the monthly average for the first period and finally multiplying it by 100, as follows:

114.2 - 113.6 = 0.6

(0.6 ÷ 113.6) x 100 = 0.5% (indexing rate for 2010)

It is important to note that the calculation of the increase payable each January does not include the monthly increases for the last three months of the previous year (October to December). These rates will be incorporated in the following year's calculation.