Adjusting for inflation
Inflation adjustments added to your pension can help preserve your buying power throughout your retirement.
Just as you may receive a pay raise while working that helps offset increases in the cost of living, your future pension payments may increase from time to time thanks to inflation adjustments. These adjustments help your pension keep pace with increases in the cost of living.
The Public Service Pension Board of Trustees has granted inflation protection according to the plan rules every year to date. However, although inflation adjustments have been granted annually, they aren't a guaranteed benefit. You may not receive an inflation adjustment each year, and the amount may change from year to year. However, once you receive an adjustment, it becomes part of your basic lifetime pension.
When granted, inflation adjustments are also applied to the bridge benefit and temporary annuity portion of your pension, if applicable.
Each year, the board carefully considers several factors to decide whether to grant an inflation adjustment and, if so, its value.
To understand how this works, it helps to know that your pension is funded through two accounts: the basic account and the inflation adjustment account.
Basic account = funding for basic pension
Member and employer contributions, and investment returns fund the basic account. Your basic pension is paid each month from funds in the basic account.
Inflation adjustment account = funding for inflation adjustments
The inflation adjustment account is separate from the basic account. Member and employer contributions, and investment returns also fund this account.
While your basic pension is based on a formula, inflation adjustments are not guaranteed. They are based on the funds available in the inflation adjustment account. If the board grants an adjustment in a particular year, funds from the inflation adjustment account are transferred to the basic account so they can be applied to your basic pension, and bridge benefit and temporary annuity, if applicable.
Calculating inflation adjustments
The board seeks to ensure that inflation adjustments are sustainable over the long term. Inflation adjustments are not guaranteed; they are based on:
- Annual change in the 12-month average Canadian consumer price index (CPI) from November to October
- Funds available in the inflation adjustment account of BC's Public Service Pension Plan
Each year, the board considers changes to CPI and the available funds in the inflation adjustment account. If the board grants an inflation adjustment, it takes effect the following January.
These adjustments add up over time. For example, if you had started receiving an annual pension of $20,000 in 2000, your annual pension in 2020 would be $29,380.