How Will Your Pension Under RREGOP be Adjusted to the Cost of Living?

As you know, the cost of living increases over time. You can buy less today with $100 than you could five years ago. This is called inflation. When planning your finances for retirement, it is important to take this into account because retirement can last more than 30 years. Your buying power decreases each year if your retirement income is not adjusted to the cost of living, that is, indexed. The retirement pension under the Québec Pension Plan (QPP) and the Old Age Security pension are indexed. How is the pension under RREGOP adjusted?

Your retirement pension under RREGOP will increase on 1 January of each year according to a formula based on the Pension Index (PI). The same formula is used to adjust the retirement pension under the QPP each year. Unlike that pension, the adjustment of the pension under RREGOP does not fully cover the increase in the cost of living. But rest assured: the adjustment cannot be negative. Your pension amount cannot decrease.

More specifically, each 1 January:

• your pension will be adjusted based on your years of service;
• the portion of your pension that corresponds your years of service accrued between 1 July 1982 and 31 December 1999 will be adjusted based on the PI minus 3%;
• the portion that corresponds to your years accrued since 2000 will be adjusted based on what is most advantageous between half the PI and the PI minus 3%. To keep it simple, if the PI is less than 6%, it will be half the PI. Therefore, if the PI is 2%, your pension will be adjusted by 1%;
• this will be different for your very first adjustment on 1 January. Your pension will be adjusted based on the number of days during which you received it during the first year of payment. For example, you start receiving your pension on 1 July. On 1 January of the following year, it will be adjusted by half of what is expected because you will have received it for half of the previous year.

What you need to remember is that once you retire, you will not have complete protection against the loss of your purchasing power. However, given that most of your career will have taken place as of the 2000s, you can expect your pension to be adjusted each year by approximately half of the cost of living.

You can consult your Statement of Participation under RREGOP in My Account to find out the adjustment that will apply to your pension once you receive it. Once you start receiving your pension, you can consult your Statement of Benefits at the end of each year to find out the breakdown of the calculation of the adjustment of your pension and the new amount of your pension for the following year.