Wednesday, December 18, 2013

Retirees to receive full cost of living increase in 2014

The Government of New Brunswick has issued the following news release:

FREDERICTON (GNB) – Retirees who had been receiving pensions under the Public Service Superannuation Act will receive a cost-of-living increase in 2014 equal to 100 per cent of the inflation rate under the new shared risk plan.

"With the measures we have implemented, retirees can be assured that their pensions will never go below their current level and cost-of-living increases will continue to be provided," said Finance Minister Blaine Higgs. "We have been clear that, while the public service shared risk plan is designed to provide members with cost-of-living increases at a minimum of 75 per cent of inflation during a 20-year period, it has the ability to pay 100 per cent, which it will this year."

Each year, the funding level of the public service shared risk plan will determine whether the plan is able to provide a cost-of-living increase. Although cost-of-living increases are conditional on plan performance, the new plan is designed in such a way that the likelihood of providing annual cost-of-living increases is very high.

Effective Jan. 1, 2014, retirees' pensions will increase by 0.96 per cent. As in the former plan, the Public Service Superannuation Act, cost-of-living increases are based on the average change in inflation, also known as the Consumer Price Index, during the 12 months prior to the previous July 1.

"Former and current public servants can rest assured that their pension plan will continue to pay cost-of-living increases that rank among those provided by the best plans in Canada," said Higgs.

Higgs noted that the former plan would not have provided an increase in 2014 because the increase is less than one per cent.

"Under the former plan, the 0.96-per-cent increase would have been carried forward and provided in a subsequent year,” he said. “With the new plan, when there are enough funds in the plan to pay for a cost-of-living increase, it is provided in that year. It is important to remember that, if a shared risk model had been adopted 20 years ago, the cost-of-living increases that retirees received would have been identical to what they were under the former plan."