Calculation of Cost of Living Adjustment (COLA)
Teachers' Pension Plan - CPI Minus 1% Method
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July 1, 2011
Re: The Nova Scotia Teachers’ Pension Plan - Indexing method of ‘CPI minus 1%’ as pertaining to a Cost of Living Adjustment (COLA) or Indexing of Pension Benefit
Effective July 1, 2011, a Cost of Living Adjustment (indexing) will be added to your monthly pension benefit from the Teachers’ Pension Plan. An increase in your pension benefit may be granted when the increase in Canada’s average Consumer Price Index (CPI) is greater than 1%.
Please see the chart below for a more detailed explanation of how this year’s Cost of Living Adjustment (Indexing) amount has been derived.
Increase in the average Consumer Price Index (CPI)
minus 1.0% as prescribed by the formula
Cost of Living Adjustment |
2.1%
-1.0%
1.1% |
_________________
Information on the Consumer Price Index The Pension Index for a particular year is calculated as the average of the Consumer Price Index (CPI) for Canada (All Items), as published by Statistics Canada, for the 12 months ending April 30 of the previous year.
The CPI is made up of eight major classes, including:
1. Food
2. Shelter
3. Household operations and furnishings
4. Clothing and footwear
5. Transportation
6. Health and personal care
7. Recreation, education and reading
8. Alcoholic beverages and tobacco products
Goods and services are organized by Statistics Canada according to a classification system. Products are grouped with other items because they have a common end use or because they are substitutes for each other. Products are then grouped together to form basic classes.
Calculation of the Pension Indexes for 2010 and 2011
| Month |
|
CPI |
|
Month |
|
CPI |
| May 2009 |
|
114.7 |
|
May 2010 |
|
116.3 |
| June 2009 |
|
115.1 |
|
June 2010 |
|
116.2 |
| July 2009 |
|
114.7 |
|
July 2010 |
|
116.8 |
| August 2009 |
|
114.7 |
|
August 2010 |
|
116.7 |
| September 2009 |
|
114.7 |
|
September 2010 |
|
116.9 |
| 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 |
| Average |
|
115.1 |
|
Average |
|
117.5 |
Calculation of Cost of Living Adjustment (COLA)
Average CPI for 12 months ended April 2011
minus Average CPI for 12 months ended April 2010
divided by Average CPI for 12 months ended April 2010
minus 1.0%
= [(117.5 - 115.1) divided by 115.1] minus 1.0%
= 2.1% minus 1.0% = 1.1%
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