One of the standout benefits of having a Public Service Pension Plan (PSPP) pension is the assurance of guaranteed income for the rest of your life. With a defined benefit pension, you can retire with confidence, knowing your income is protected against inflation through an annual Cost of Living Adjustment (COLA). This feature ensures your purchasing power remains stable throughout your retirement years.
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What is COLA?
The Cost of Living Adjustment (COLA) is an integral feature of your PSPP pension. As the cost of living rises, COLA adjusts your pension payments to keep pace with inflation. The adjustment is calculated using the Consumer Price Index (CPI) and is designed to safeguard your retirement income against rising prices.
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Key Highlights of COLA:
- Annual Increases: Your pension can increase by the CPI, up to a maximum of 8% per year.
- Excess CPI Carryover: If the CPI exceeds 8%, the excess is carried over to the following year when the CPI is below 8%.
- 2025 COLA Adjustment: The COLA increase for 2025 is 2.7%. If you began your pension before 2024, you will receive the full 2.7% increase. For pensions starting in 2024, the increase will be pro-rated based on the months you received payments.
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How is COLA Calculated?
COLA is determined through a detailed three-step process:
- CPI Review: The CPI is analyzed over a 24-month period ending September 30 of the current year, split into two 12-month periods.
- Averages Calculation: The average CPI for each 12-month period is calculated.
- COLA Percentage: The average CPI of the second 12-month period is divided by the average of the first 12-month period to determine the COLA percentage for the upcoming year.
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When Will My Pension Increase?
COLA increases are applied every January and reflected in your Retired Member Statement (RMS), which you will receive that same month. If you are a survivor receiving a PSPP pension, a letter will also be sent to you outlining your annual COLA adjustment.
Early Retirement and Inflation Protection
If you retire before age 65, your PSPP pension will still be protected against inflation. Annual COLA adjustments ensure your income keeps up with rising costs, regardless of your age at retirement.
Early Retirement Bridge Benefit:
For those retiring early, an early retirement bridge benefit is available. While the bridge benefit and any associated COLA adjustment end at age 65, your lifetime PSPP pension will continue to receive COLA increases indefinitely.
Why COLA Matters
COLA offers retirees the confidence that their pensions will maintain value over time. By tying adjustments to inflation, the PSPP ensures that retirees can sustain their standard of living, even as the cost of living changes.
Questions? For Help
If you have questions about COLA or its impact on your pension, contact here:
- Phone: 416-364-5035
- Toll-Free (Canada and U.S.): 1-800-668-6203
For more details on early retirement and CPP integration, visit our resources or reach out to us directly. Your PSPP pension is here to provide the financial stability you deserve.
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