2023 Pensioner Increase – Hourly Pension Plan

2023 Pensioner Increase – Hourly Pension Plan

January 1, 2023

McMaster University Hourly Pension Plan (the “Pension Plan”)

McMaster’s Hourly Pension Plan allows for an annual pension increase when the Plan’s five-year average rate of return exceeds 6.0%.  This increase can be up to 100% of the Consumer Price Index (CPI).  If the excess return is larger than the current CPI increase, the amount can be used to further top-up the previous three years of increase to bring them up to 100% of CPI (known as supplemental pension increase).  In the past, this formula resulted in regular increases to pension payments.

2023 Annual Pension Increase (0%)

The past year has been challenging due to increasing inflation at levels not seen in a very long time. As it often happens in times of growing inflation, the Pension Plan’s investments have not performed at a rate that has kept up with the growing cost of living.

The average rate of return for the 5 years ended June 30, 2022 was 3.31%, and the average Consumer Price Index (CPI) for the 12-month period ending June 30, 2022 was 5.53%.  Since the average rate of return is less than 6% there will be no annual pension increase for January 2023.

For further details on the calculation of the pensioner increase, please refer to the Audit Statement posted here.

2023 Supplementary Pension Increase (0%)

As mentioned above, the Supplementary Pension Increase provision of the Plan provides for increases in excess of the annual average CPI if the following two conditions are met:

• The rate of return in excess of 6% exceeds the CPI Formula; and
• The cumulative increase from Annual Pension Increases and Supplementary Pension Increases was less than the cumulative increase based solely on CPI Formula increases in the previous 3 years.

Since both conditions were not met, there will not be a Supplementary Pension Increase for January  2023.

Please refer Section 6.06 and 6.11 of the Pension Plan text for specific details regarding the calculations for the Annual Pension Increase and Supplementary Pension Increase.

Although there are no increases this year, the Pension Plan provides protection for pensioners by having a supplementary pension increase provision which considers whether the rate of return in excess of the 6% threshold is larger than the current CPI increase.  If it is, that amount can be used to top-up the previous 3 years of increase to bring them up to 100% of CPI.  The determination of increases for future years will include this look-back provision to determine whether a supplemental increase may be indicated.

The information provided on this website is intended to summarize in plain language, the McMaster University Contributory Pension Plans and their respective audited financial statements. For an exact and complete description of the Plan and the financial statements, consult the Plan Text and audited financial statements. In cases where the information provided on this website differs from that contained in the Plan text and audited financial statements, the Plan text and audited financial statements will govern.