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Important update for retired members, survivors, and dependents receiving pensions under UPP.
UPP is pleased to announce that retired members, survivors, and dependents in pay will receive an inflation protection increase to the UPP portion of their pensions of 4.75% at January 1, 2023. Please note, this increase, or indexation, will only be applied to benefits accrued under UPP provisions for service on and after July 1, 2021. For those whose prior pension plan converted to UPP, UPP honours the pension adjustment provisions of your prior plan.
Impacted members will receive a letter with further details in January 2023.
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What is inflation protection?
Inflation protection is a valuable benefit designed to increase the amount of your monthly pension in pay through a cost-of-living adjustment based on the increase in the Canadian Consumer Price Index (CPI). The cost-of-living adjustment is also sometimes referred to as indexation.
What is Consumer Price Index (CPI)?
Statistics Canada measures monthly changes in the cost of living. Each month, it examines the price of a basket of goods and services typically purchased by Canadian households and compares the ups and downs to the previous month. This is called the Consumer Price Index (CPI). The CPI is widely used as an indicator of the change in the general level of consumer prices and the rate of inflation. Find more information about the CPI on the Statistics Canada website.
How does UPP calculate the inflation protection rate?
When you retire with a UPP pension, it’s guaranteed income for the rest of your life. Your defined benefit pension for UPP service includes annual conditional funded indexation of up to 75% of the increase in the Canadian CPI. In 2023, UPP is providing indexation at the full 75%, which means retired members, survivors and dependents in pay will receive an increase to their pensions accrued under UPP provisions of 4.75% at January 1, 2023.
Determining the inflation protection increase for January 1, 2023:
(a)= 148.84
(b) = 139.98
=
1.063 or
6.33%
Increase in CPI
75% of the 6.33% increase = 4.75%
(a) the CPI 12-month average (with each month determined at month end) for the period ending on the September 30 immediately before the January 1 effective date;
divided by
(b) the CPI 12-month average (with each month determined at month end) for the period ending on the September 30 immediately before the September 30 in (a) above.
Note: if (a) is less than (b), the Increase in CPI shall be 0%.
The indexation paid by UPP is equal to 75% of the percentage change in the two averages of CPI.
What does conditional funded indexation mean?
When you retire and begin receiving your pension, the portion attributable to UPP benefits will be subject to funded conditional indexation. This means that any indexation adjustments will be determined by UPP’s Joint Sponsors. UPP’s target funded conditional indexation is 75% of the increase in CPI for Canada but may be less based on the Plan’s overall financial health and Funding Policy.
Once the indexation adjustment has been made, it is permanently applied to your retirement income, and your pension will never be reduced.
Why doesn’t this indexation apply to my pre-conversion pension?
When your prior plan converted to UPP, UPP promised to honour the pension adjustment provisions of your prior plan. This includes how adjustments are determined/calculated and when they are paid.
How much does my pre-conversion pension increase this year?
Your pre-conversion benefit will be increased based on the pension adjustment provisions of your prior plan. You will be notified by direct mailing regarding the amount of the adjustment, if any, and when it will be added to your pre-conversion benefit.
Why is my increase less than 4.75%?
If you started to receive your pension in 2022, your indexation amount is prorated for the length of time you received a pension. For example, if you retired in June 2022, your indexation is based on the 6 months you received a pension this year, and you will receive 50% of the 4.75% increase.
Have additional questions? Please contact your university pension administration team, or UPP’s Member Services via email: [email protected]
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