How inflation impacts your pension in retirement

Inflation refers to the gradual increase in prices over time and usually feels modest on an annual basis. Over the long term, however, it can have a meaningful impact. For those living on a fixed income in retirement, rising expenses may slowly reduce purchasing power unless steps are taken to help offset inflation.

Inflation protection and your PSPP pension

Your PSPP pension is designed with features to help protect you from the effects of inflation throughout retirement. Through annual cost of living adjustments (COLA), your pension may increase over time to better reflect changes in the cost of living. These adjustments help your pension maintain its purchasing power, giving you greater peace of mind that rising prices won’t significantly reduce your income in retirement.

Inflation before retirement

Inflation also matters while you’re working. Higher inflation can affect savings goals, expected expenses, and the amount of income you may require in retirement. OPB’s planning tools, such as the Retirement Planner, can help you factor inflation into your projections by showing how your income, savings, and expenses may change in the future.

Why planning is important

In addition to your PSPP pension, additional government pension benefits like CPP, as well as personal savings and investments, all play a role in helping you manage inflation risk. Understanding how these work together can help you make more informed decisions about when to retire and how much income you might need.

If you want help with pension planning or more information about COLA adjustments or any other PSPP features and benefits, please contact us.