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Indexing Explanation

The indexing rate for 2012 is 2.8%. 

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 2012 pension increase.

Month/Year CPI* % Month/Year CPI* %
October 2009 114.6 October 2010 117.4
November 2009 115.2 November 2010 117.5
December 2009 114.8 December 2010 117.5
January 2010 115.1 January 2011 117.8
February 2010 115.6 February 2011 118.1
March 2010 115.6 March 2011 119.4
April 2010 116.0 April 2011 119.8
May 2010 116.3 May 2011 120.6
June 2010 116.2 June 2011 119.8
July 2010 116.8 July 2011 120.0
August 2010 116.7 August 2011 120.3
September 2010 116.9 September 2011 120.6
Total
1,389.8
Total
1,428.8
Monthly Average
115.8
Monthly Average
119.1

* The Consumer Price Index, September 2011, Statistics Canada, Catalogue no. 62-001-X, monthly.

The pension increase (indexing rate) for 2012 is the percentage increase in the monthly average CPI. This is calculated by subtracting the monthly average for the first period (October 2009 to September 2010) from the average for the second period (October 2010 to September 2011), then dividing this amount by the monthly average for the first period and finally multiplying it by 100, as follows:

119.1 − 115.8 = 3.3

(3.3 ÷ 115.8) × 100 = 2.8% (indexing rate for 2012)

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.