2025 Cost-of-Living Adjustment (indexing)
Your monthly PSSP pension payment will not increase due to Cost-of-Living Adjustments (COLA, also referred to as indexing) in 2025.
However, we are pleased to share that following the 2025 Funded Health Review, COLA has been approved at 2.61% per year for the next five-year period, starting January 1, 2026 through December 31, 2030.
About the Funded Health Review
COLA for the PSSP is determined by the Funded Health Review (Review). This Review is conducted in accordance with the Public Service Superannuation Act’s (PSSA) funding policy, which mandates Public Service Superannuation Plan Trustee Inc. (Trustee) to conduct a review of the Plan’s funded health every 5 years. The purpose of the Review is to determine the Plan’s capacity to afford COLA for the next 5 years and to review the adequacy of contribution rates.
The last Review (the 2020 Funded Health Review) was based on the Plan’s funded status at December 31, 2019, which was 98.5%. As stipulated by the PSSA’s funding policy, no COLA can be granted when the Plan’s funded status is below 100%. As a result, COLA was set at 0% for the current five-year period, January 1, 2021 – December 31, 2025.
The 2025 Funded Health Review was based on the Plan’s funded status as at December 31, 2024. At that time, the Plan was 114.6% funded, with a funding surplus of $1.05 billion.
Following the Review, and in accordance with the PSSA’s funding policy, the Trustee approved the following actions:
- Granting of COLA at 2.61% per year for the next five-year cycle, from January 1, 2026, to December 31, 2030.
- Allocation of approximately $525 million of the funding surplus to the Plan’s strategic reserve to help protect long-term financial sustainability.
- Determination that contribution rates for members and employers were sufficient to support the Plan and no changes to contribution rates were required at this time.
After these decisions were applied, the Plan’s funded status was 106.8%, with a surplus of $525 million allocated to the strategic reserve as at December 31, 2024.
The Trustee has a fiduciary duty to manage and administer the PSSP responsibly, ensuring its long-term sustainability while balancing both current and future pension obligations. The Trustee is committed to supporting the sustainability of the PSSP, guided by the PSSA’s funding policy, which provides clear options to effectively manage the PSSP’s assets and liabilities.
Q&As
Why is a funded-health review of the Plan required every 5 years?
In 2009, the Plan was significantly underfunded. On December 31, 2009, the Plan was 69% funded with a $1.6 billion funding deficit. The PSSP was modernized in 2010-2012 and a new funding policy was embedded in the PSSA. This initiative reduced the Plan’s liabilities by $1 billion. This funding policy provides for conditional indexing for PSSP retirees. Conditional indexing means that indexing may only be paid if the PSSP can afford it. The Plan’s funding policy was constructed to ensure the long-term financial sustainability of the Plan and is designed to treat all PSSP members, retirees and actives, as fairly and equitably as possible.
Why doesn’t the PSSP provide guaranteed indexing for all its members?
The PSSP’s funding policy does not allow for guaranteed indexing. Guaranteed indexing is very expensive and, if tied directly to full CPI, would drive the PSSP into a substantial deficit position. The PSSP has a limited amount of funds and must be managed carefully, keeping in mind the interests of its active and retired plan members, as well as the interests of its future generations. The Plan is no longer ‘backstopped’ by the Province and must ‘sink or swim’ on its own. This makes it even more important for the Trustee to strictly adhere to the PSSP’s funding policy
How do other public sector pension plans in Canada deal with indexing for their retirees?
Canadian jointly-sponsored public sector pension plans, like the PSSP, have increasingly been adopting conditional indexing; and some plans provide no indexing at all. The ability of a pension plan to pay indexing ultimately depends on the plan’s funded health.