1. Inflation and Your Pension

2. 1 Base inflation adjustment 2 Plan’s funding status 3 When you worked & earned pension credit Three Factors Affect Annual Increase 2 T H R E E F A C T O R S

3. Reflects annual increase in cost of living Increase measured by changes in Consumer Price Index (CPI) To calculate base adjustment, we compare average monthly CPI for 12 months ending in September to 12-month average a year earlier This effectively averages monthly CPI increases 1 Base Inflation Adjustment 3 T H R E E F A C T O R S

4. Determines how much of the base inflation adjustment the pension plan can afford to pay A funding valuation may project shortfall of assets to meet the projected pension costs To address shortfall, OTF and government could provide less than 100% inflation protection for pension credit earned after 2009 Inflation protection levels can be partially or fully restored when funding status improves 2 Plan’s Funding Status 4 T H R E E F A C T O R S

5. To determine your annual pension increase, we look at three periods of pension credit (actual teaching time): 1. Before 2010 2. During 2010-2013 3. After 2013 Each period has a different level of inflation protection 3 When You Worked & Earned Pension Credit 5 T H R E E F A C T O R S

6. Pension Credit Earned Before 2010 100% inflation protection What does this mean when you retire?  This portion of your pension keeps pace with annual CPI increases 6 T H R E E P E R I O D S O F P E N S I O N C R E D I T

7. Pension Credit Earned During 2010-2013 50% to 100% inflation protection What does this mean when you retire?  This portion of your pension receives at least 50% and up to 100% of annual CPI increase 7 T H R E E P E R I O D S O F P E N S I O N C R E D I T

8. Pension Credit Earned After 2013 0% to 100% inflation protection What does this mean when you retire?  This portion of your pension receives from zero to 100% of annual CPI increase 8 T H R E E P E R I O D S O F P E N S I O N C R E D I T

9. Summary When you earned your pension credit Inflation protection level What it means when you retire 9 T H R E E P E R I O D S O F P E N S I O N C R E D I T Earned before 2010100% This portion of your pension will keep pace with annual increases in the Consumer Price Index (CPI). Earned during 2010-201350% to 100% This portion of your pension will receive at least 50% and up to 100% of the annual increase in the CPI. Earned after 20130% to 100% This portion of your pension will receive from zero to 100% of the annual increase in the CPI.

10. Assumptions Louise, Jason & Chloe are at different stages of their careers Each will retire with a $50,000 annual pension after 25 years of full-time teaching The plan determines the annual base inflation adjustment is 2% OTF and government set the level of inflation protection for the year at:  70% for pension credit earned during 2010 to 2013, and  70% for pension credit earned after 2013 10 E X A M P L E S

11. Assumptions Based on 2% inflation, annual pension increase will include:  2% for pension credit earned before 2010 (100% of 2%);  1.4% for pension credit earned during 2010 to 2013 (70% of 2%); and  1.4% for pension credit earned after 2013 (70% of 2%). Let’s look at how this affects Louise, Jason and Chloe. 11 E X A M P L E S

12. Louise: Late-Career Teacher The big picture:  75% of Louise’s pension will be fully protected against inflation throughout her retirement  Remaining 25% will be conditionally protected E X A M P L E S When Louise earned her pension credit Inflation level How we calculate the increase: Pension X inflation level X % of credit Her pension increase 75% earned before 2010100% of CPI = 2.0%$50,000 X 2.0% X 75%$ 750 15% earned during 2010-2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 15%$ 105 10% earned after 2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 10%$ 70 Total Pension Increase $ 925 12

13. Jason: Mid-Career Teacher The big picture:  45% of Jason’s pension will be fully protected against inflation throughout his retirement  Remaining 55% will be conditionally protected E X A M P L E S When Jason earned his pension credit Inflation level How we calculate the increase: Pension X inflation level X % of credit His pension increase 45% earned before 2010100% of CPI = 2.0%$50,000 X 2.0% X 45%$ 450 15% earned during 2010-2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 15%$ 105 40% earned after 2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 40%$ 280 Total Pension Increase $ 835 13

14. Chloe: Early-Career Teacher The big picture:  100% of Chloe’s pension will be conditionally protected against inflation throughout her retirement E X A M P L E S When Chloe earned her pension credit Inflation level How we calculate the increase: Pension X inflation level X % of credit Her pension increase 0% earned before 2010N/A 12% earned during 2010-2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 12%$ 84 88% earned after 2013Set at 70% of CPI = 1.4%$50,000 X 1.4% X 88%$ 616 Total Pension Increase $ 700 14

15. 1 Annual inflation increases are determined each year after you retire 2 You don’t bank or accumulate a particular level of inflation protection while you work Top 4 Things to Remember 15 W R A P U P

16. 3 Throughout your retirement, you will receive:  100% inflation protection for any pension credit earned before 2010, and  a variable amount of inflation protection for any pension credit earned after 2009. The amount will vary each year, depending on the plan’s ability to pay for it. 4 Annual inflation increases are added to your existing pension amount – this new amount becomes your new lifetime pension Top 4 Things to Remember 16 W R A P U P

17. MORE INFORMATION Visit the pension plan’s website at www.otpp.com/funding Visit FundingYourPension.com Talk to your affiliate pension representative