Pension Increase for 2009
The Treasury Board has announced that the increase in indexing to be applied to Public Service, Canadian Forces, and RCMP pensions in January 2009 will be 2.5 per cent.
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November 6th, 2008 at 8:34 am
2.5 is hardly anywhere near the increases percentage being
experienced by seniors on fixed income. My thoughts around
this increase is ‘why bother’ ?
November 6th, 2008 at 9:03 am
This news item indicates we will get a 2.5% increase in our public service pension. I also understand that this is based on the change in the CPI for the 12 month period ending September 2008. However, the CPI change for the 12 month period ending in September 2008 is 3.4% according to Stats Canada. Why is there a difference?
November 7th, 2008 at 12:16 am
These increases are no where near the actual cost of living because they remove the most volitile items. I calculate my actual cost increases for food alone at 12.6%. My property tax increase alone is a whopping 10.6% for 2009.
Is it any wonder people have lost faith in our governments.
November 7th, 2008 at 8:21 am
The indexing of the federal public sector pension plan benefits is governed by two pieces of legislation: the applicable superannuation acts and the Supplementary Retirement Benefits Act (SRBA).
Pension increases for pensioners and their survivors are calculated each year using the full (all items) Consumer Price Index (CPI) data published by Statistics Canada, and not the “core rate”, which excludes fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products.
The CPI measures the retail prices of a “shopping basket” of about 600 goods and services including food, housing, transportation, clothing, energy, and recreation. The index is “weighted,” meaning that it gives greater importance to price changes for some products than others – more to housing, for example, than to entertainment – in an effort to reflect typical spending patterns. Increases in the CPI are also referred to as increases in the cost of living.
The pension 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 12-month period from October 1st to September 30th 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).
Over a period of time, the average pension increase comes to almost the same as the average September over September difference. What you lose in one year you pick up in another. For example, superannuation indexing for 2007 was 2.3 percent while the September 2007 over September 2006 CPI was 2.0 percent. For 2008, the indexing rate is 1.8 percent and the September 2007 over September 2006 CPI rate was 2.2 percent. Over the 9-year period from 1998 to 2006, the pension-indexing rate averages out to 2.1 while the inflation averages out to 2.2.
November 7th, 2008 at 8:01 pm
At first, my thoughts were similar to those that have commented that the 2.5% increase appears to be lower than the rate of inflation that Canada has been experiencing. However, Bernard Dussault has nicely put this into perspective with his explanation of the basis of the increase on a year-by-year basis.
Beryl Costain’s ” ‘why bother’ ” comment is curious to say the least. In the first place, if you get any increase whatever, then you’re not on a “fixed” income; rather, it’s an indexed income. In the second place, surely 2.5% beats 0% hands down!
Those of us receiving the PSSA superannuation (and the other federal pensions such as CPP and OAS, to which this increase will also apply) should, instead, be mighty grateful for a number of things: unlike pensions based on the accumulation set aside in an RRSP, we never have to worry that these pensions will “run out” because we have to dip into the accumulated funds; they are, indeed, indexed (unlike RRSP-based pensions) and, although not pension-related, we have access to two of the best supplementary health-care plans (the PSHCP and the PSDP) in the world.
Of course, there’s always room for improvement (such as the current rules governing survivor benefits), but hey, that’s why we have FSNA! The history of FSNA’s past battles when more than one ruling govenment tried to curtail our benefits is nicely summarized in the latest issue of On Guard. I invite all those who haven’t read it yet to do so to see how we really could have been shafted if FSNA hadn’t stood up for us.
November 9th, 2008 at 1:26 pm
As mentioned in previous messages on this subject, the indexing is tied to the cost of living. We have paid for indexing during our working life with the Federal Government, so why is the Government picking what seems to me to be an arbitrary figure. Is FSNA, as our voice, going to look in to this matter. Can anything be done to correct this injustice. How do we fight it.
November 10th, 2008 at 10:21 am
I agree with Les Crosthwaite’s sensible comments. Let’s be grateful for any annual increases. There are people in my own family who are retired on a fixed pension; they will never have any increases at all. The Federal Government and the Public Service Unions had the foresight to negotiate an “indexation clause” decades ago. All employees contribute 1% higher in deductions during their careers, but this is greatly appreciated once you retire.
November 10th, 2008 at 2:27 pm
Robert Snowden asks “…why is the Government picking what seems to me to be an arbitrary figure”.
As already explained, the annual pension increase is determined using a relatively simple formula that relies exclusively on 24 monthly values of the Consumer Price Index (CPI). Is the CPI not the best (if not the only) tool to measure the cost of living?
November 13th, 2008 at 1:28 pm
Unfortunately the CPI is using an index without consideration for the cost of vehicles fuels in the 24 items used to indicate encountered increases in the cost of living. Why is fuel not included as it impacts on all comodities including food, transportation etc. etc.
November 13th, 2008 at 1:48 pm
What a joke!! With the price of food, gas, and ridiculous increases to my property taxes this year, 2.5 is a total farce. Little wonder people get jaded in a hurry. Give me a break!!
November 13th, 2008 at 2:52 pm
The CPI used to determined the pension increase is the “all items” CPI, not the “core” CPI. The “all items” CPI includes at least 300 items, one of which is fuel. For more information on the CPI and the formula used to compute the annual pension increase, please refer to the following two internet links:
www.statcan.ca/english/Subjects/Cpi/cpi-en.htm
www.tbs-sct.gc.ca/hr-rh/bp-rasp/pensions/faq-eng.asp
November 13th, 2008 at 7:13 pm
As a pensioner……Just to wake up each day,above ground, is satisfying enough for me.The value of the other 300 CPI items are meaningless.
November 14th, 2008 at 4:48 pm
I would like to return to Bob Lebreton’s question of November 6th. I too thought the average rise in the consumer price index at the end of September was 3.4% so how does it get whitled down to 2.5%?
Another thing that bugs me about the indexing in general is that I always believed it was only our base pension that is reduced at age 65 but I have learned that the increases received up to age 65 are also reduced by the same percentage as our base pensions. So if you think 2.5% is small how do you feel about that getting cut back more when you hit 65.
November 15th, 2008 at 10:40 am
Wow, 2.5 percent, now I just have to make up the other 2.5 percent inflation rate for Calgary. I wonder if they look at high inflation cities in Western Canada. Also, my city taxes keep going up and it definitely not the national inflation rate try 5-6 percent.
November 16th, 2008 at 4:32 pm
Wrong attitude boys—we earned it, we worked for years for it—we deserve proper indexing. Simple as that. Not to mention, we also have PAID FOR IT!!!!!
November 16th, 2008 at 9:13 pm
As a pensioner I am very pleased to have indexed pensions, and thanks to those who were responsible. I preparing budgetary items for our local church salaried staff I noticed that hte United Church of Canada retired members will be receiving an increase of 4.1% effective Jan. 01, 2009 based on the 100% of the rise in the CPI. Why the difference?
November 17th, 2008 at 10:59 pm
As I watch MP’s give themselves 43% increases in BC and similar at the federal level in the past I am outraged that we are only getting 2.2%. Particularly when we paid for full indexing and Stats Can shows this years CPI at 3.4%. Will FSNA stand up for us and demand we get the 3.4% we paid for?
November 18th, 2008 at 7:45 am
To top that off, what about the years that the CPI was miscalculated by Stats Can and we got short changed, this was reported last year by FSNA I believe. Has anything ever been done about that other than the letter to Treasury Board by our president?
November 18th, 2008 at 12:40 pm
I am happy to get my 2 and one half percent. I can’t strike so anything is welcome.
November 18th, 2008 at 1:07 pm
As a new member of FSNA it is interesting to see the comments from people complaining about a 2.5% increase. I would just like to say that those of us still slugging away in the Public Service, whose contracts are several years expired, and with whom TB is pretendng to negotiate, are being offered much less than that and the last pay increase my group (scientists) received after an arbitral award was in 2006. I would be very happy with 2.5% and 2.2% last year without having to fight for it.
November 18th, 2008 at 9:58 pm
The CPI is calculated on a mystical “basket of goods and services” most of which don’t reflect spending needs of seniors. In its application, it is definitely not appropriate for indexation of pensions. For those that take the bother, you readily see how the purchasing power of your pension income erodes after even a few years of indexation by the CPI formula.
The pension must meet real expenses of living - food, fuel, property taxes, hydro, transportation, insurance and other essentials, all of which have risen considerably faster than the watered-down CPI figure.
Our heating fuel,for example, not a minor expense, increased by over 100% over the past two years. Similarly, auto fuel. Nothing that I’m aware of in our basket of essentials went down in price to enable absorbing those costs within the “indexed” pension.
Indexation was not a gift of government - it was prepaid by an increase to pension deductions from salary to protect the purchasing power of the pension.
It is not doing that.
I don’t know what sort of measure would be more appropriate to calculate pension indexation but the CPI method certainly is not the right approach, especially the manner in which it is being used, or misused, to keep your pension shrinking.
Its likely time for FSNA to grab this one and run with it. Costs are going to continue spiralling upward for the foreseeable future. At 2.5 % indexation, pensions will spiral downward in real dollar terms at the same time.
November 19th, 2008 at 12:56 pm
Let’s face it, any figure can be manipulated to suit a situation. I also think that had not the Liberals abscounded $30.4 billion from our pension funds, we could do better. I am grateful for the 2.5% but it also means taking in another notch on the belt like many others are compelled to do.
November 19th, 2008 at 1:58 pm
Let’s face it, we are much better off recieving 2.5 than nothing at all like many private pensioners!!
November 20th, 2008 at 12:15 am
No offence Mike but that is the wrong attitude to have. We did not belong to a private pension fund we contributed and handsomely I might add, to the PSSA and we should be properly compensted under the Act. We probably are but those in charge of explaining it to us are doing a poor job of it.
To GK Higgenbottam I can only encourage him to check his math. According to this morning’s paper the unions are telling the Treasury Board to “stick it where the sun don’t shine” because they are being offered 2.5% for 2007. In 2007 we got 1.7%. In today’s economy I would expect the TB to hold the line on increases to the CP index average for the year and after the throne speech today I believe that is exactly what will happen. Welcome to the club.
November 20th, 2008 at 5:11 pm
As a newbie with just a second indexing in my short retired life, I am grateful that we get indexing at all. I trust FSNA will work to get the correct indexing over the course of time.
Bernard, thanks for your explanation.
Hey Jack, do you really believe we “paid for it”. Sure, we put money in but it only takes a short while drawing out a pension to get all of it back. No amount of clever investing, risky or otherwise could reap the benefits we enjoy. We are fortunate to have such a great pension plan. Millions of Canadians are envious (and bitter I suspect).
Now the $30B, well that is another matter. I trust the fight continues? (Not that Canadians can really afford pay it back). Deleting the pension reduction at age 65 may be a good compromise though. I’d go for that. Even a payback of contributions for the years where the employer didn’t contribute its share would be a good start.
November 20th, 2008 at 10:41 pm
TB is imposing on it’s unions 2.3% for 2007 and 1.5% for 2008, 2009 and 2010 collective bargaining contracts in the public service…I am retiring in 2009 and and can’t help but be jealous of your 2.5% rise in retirement income whereas I am getting only 1.5% increase on this,my last year’s salary…Seems the working stiff gets stiffed yet again: we uncivil servants have been without a contract since April 2007, and these are the 5 last years that count the most for my pension calculations….ouch! Can’t wait until I get an automatic yearly raise like you retirees….
November 21st, 2008 at 1:03 pm
Apparently that those of us on CPP are going to pay entirely for our governments proposed bailout of the auto industry. The increase in CPP is nowhere near the CPI, but we have no choice in the matter at all. The CPI was lower than it should have been this year because it didn’t take the cost of feul into consideration, gimme a break - we have to heat our homes, eat food which has gone up largely due to the price of transportation + farm input costs. But if the pension was tied to the CPI the increase would have been greater.
I guess we should be thankful that we at least have the CPP pension -people in most countrys don’t even have that.
November 21st, 2008 at 7:44 pm
I agree totally with Jack McEwan. As to Frank Poole, many of us have already pulled in our belts to the max. As to Jurgen, you are new, you will eventually learn that FSNA doesn’t do much for you except raise your dues and there goes your 2.5%. Property taxes up 10% this past year, utilities up, fuel prices up, I guess this is as good a time as any to give up all volunteering.
I have been a retiree for 13 years and FSNA has done nothing to improve our indexing, so wake up newcomers .
November 21st, 2008 at 9:38 pm
Why are some of you so keen to accept less than you are legally contracted to receive? The deal is we get the CPI calculated by Stats Can each and every year. Last year when we got 1.6% I accepted it based on the CPI calculation. The argument then was that in gets evened out over the years, some low and some high. That argument gets washed away when TB arbitrarily changes the rules. This is what you get with a Harper government. He can’t stick to the rules and he fabricates lies to cover his actions. Once again seniors get screwed by the Harper government.
November 22nd, 2008 at 8:22 am
Why are so many people complaining about this increase and the way it is calculated - didn’t any of you look into your pension benefits before you retired? Take the 2.5% and run. Chances are that many of your friends & relatives would trade places with you in a second!
November 24th, 2008 at 11:07 am
Interesting comments to date , especially the explanation of how our indexing is calculated and the time frames used. Hopefull the 2010 rate will reflect the market volatility and swings we’ve seen since September this year.
As far as the comments as to what FSNA does for us, I’d like to see FSNA go for 100% reimbursement on our health benefits rather than the current 80%. This, together with an increase in overall coverage levels would address the costs of living / fee increases we’ve all seen from our Health practitioners .
As well a negotiated cap on drug costs with the true Robber Barons we have in Canada, the Pharmacies and Drug companies would go much farther to help our Pensions than a simple annual indexing on it’s own.
November 24th, 2008 at 4:46 pm
Very interesting comments. Re Merv Swityk comments of Nov 21st…I tend to disagree with you. I have been retired for almost 7 years. I have been a FSNA member from the time of my retirement. It is always easy to be critical, however, indexing increases are only a part of what we should all be following and although I have not been active in any FSNA activities, I try to follow the issues and priorities that are being pursued. I sincerely appreciate what FSNA is doing and I believe the measly cost that I am paying is well worth it. Where else can you get the benefits that they provide for less than a coffee and a donut per month? For one, I cannot begin to imagine where I would be without the benefits of the PSHCP and the Pensioners Dental Care Plan. In following the correspondence that I receive on a regular basis, FSNA is very aggressively pursuing the maintenance and ongoing improvements of these benefits. I have many peers and friends who do not have any of these benefits and would give their eye teeth of get what we take for granted. Without the hard work and voice that the FSNA staff and volunteers provide these benefits could and likely would be eroded away.
I believe people like Merv Swityk should step forward and take up an executive position with FSNA so that all the things he thinks are lacking can be acted on in the way he thinks will meet his expectations, or maybe he should just cancel his membership.
November 24th, 2008 at 7:53 pm
There has been much interesting reading in all of the foregoing remarks, but I will say, yes, a greater indexing for 2009 would have been very much appreciated, however, having retired from the Forces in Dec 1975, then a short PS career terminated by disability, I have drawn my full indexed pensions now for some 23 years, and by my calculations of contributions, I am just happy to be still collecting and figure they don’t really owe me anything.
December 9th, 2008 at 3:38 pm
Complain, complain, complain…..lol….don’t forget that we, the retired, were the Federal Government at one time, we made it tick, we know how it works. Take the 2.5% and run! Anyone who thinks we would get an increase, more than the cost of living is dreaming. To be without an indexed pension would be a nightmare.
We still have some of the best minds in the country that can still think. We haven’t retired our minds and never forget that we still have power in numbers.
The explanation by Bernard Dussault of the 2.5% increase, is very sound and I thank him for it.
Even though it was low last year, I agree it should have been a touch higher this year, but it does average out over time, hey, I’m happy to have an indexed pension. Keep a positive attitude people.
December 31st, 2008 at 4:43 pm
Sorry for joining this thread so late; I didn’t realize that the 2009 CPI increases would be available so early.
If a 2.5% increase sounds low, prepare for a significantly smaller increase a year from now. I note that OAS payments are not increasing effective 1 January because Stats Can says the CPI did not increase over the last quarter.
I’m not an actuary, but my gut feeling tells me that the 1% we all paid every year to index our pensions fully covers the cost of that future indexing…..I don’t believe we need “thank” our employer for the indexing. For example, a public servant earning an average of $50,000 over a 25 year period paid an average of $500 every year for future indexing. That 1%, compounded over the full working career, would provide a substantial base to fund future CPI increases. If the annual pension is now $25,000, a 2.5% CPI increase is $625. How many years does the average federal public servant live past retirement? And don’t forget that the cost of indexing a survivor’s pension is only half as much.
As for our benefits in retirement, I could never figure why employees get their dental plan for free, but retirees, trying to live on a greatly reduced income, have to pay for dental.
I’ll be 64 in March….I too am dreading the reduction in my Superann at 65. I understand the reasons for the reduction, (i.e. the reasons for integrating our pensions with CPP), but I think, in retrospect, the unions made the wrong decision back in the late 60’s.
While I appreciate having a defined benefit pension, especially in these days of employers using any and every excuse to get out of their pension obligations, I don’t think our pensions are particularly generous, considering the very high premiums we paid, and that shocking reduction of approximately 1/4 to 1/3 at age 65. Even with the OAS kicking-in at 65, there is a net reduction in income.
One small consolation, for those turning 65 over the next few years, is that the reduction formula has been “reduced’. In my case, my reduction will be about $425/year less than under the original formula. “Better in my pocket than theirs”, as the saying goes.
I’m puzzled by comments suggesting that our employer is somehow “cheating” in the calculation of the amount of indexing…..or that Mr. Harper or Treasury Board has somehow changed the rules. Hopefully the FSNA, PSAC, PIPS, etc would be screaming blue murder if that was the case.
As for comments noting that our 2.5% increase compares favourably with the lousy multi-year contract (2.3%, 1.5%, 1.5% and 1.5%) Treasury Board has just imposed, ( I know, I know….the unions still have to “ratify” it……enabling the government to maintain the illusion that collective bargaining is alive and well in the public service, when it died several decades ago), I feel the frustration of current employees, whose wages are dropping further and further behind the real cost of living every year. And, in the end, lousy wages mean lousy pensions.
Given the current economic conditions, however, our benefits and pensions could be a lot worse, eh?