The references used by the federal government to calculate the indexing rate – Retired members
Here are a few explanations:
What is indexation: indexation is an annual increase in the pensions of federal government employees and veterans. As a general rule, data from the Consumer Price Index (CPI) is used to calculate the annual indexation of pensions.
The annual CPI-based indexation of federal government pensioners applied each January is based on the percentage increase in the average monthly CPI over the previous two years. The calculation uses data for the 12-month period from 1 October to 30 September. The last three months of the year are incorporated into the following year’s rates.
Inflation and indexation are not the same thing. Inflation is a measure of the increase in the price of goods and services in general terms. The CPI is generally used to calculate inflation.
Indexation, on the other hand, is a technique that aims to a counteract the long-term effects of inflation in order to maintain purchasing power. Over time indexation keeps pace with inflation. As indexation and inflation are both based on the CPI, they tend to follow the same pace.
One is sometimes higher than the other, but they eventually catch up.
As the indexation of pensions for federal government retirees accumulates year on year, a pension worth $25,591 in 2011 will be worth almost $30,000 in 2021. (It’s important to note that the average pension increases at a different rate since it also reflects demographic changes, salary changes and the rate at which people retire.
