January 24, 2002
TO: CANADA LIFE PENSIONERS IN CANADA
It is my pleasure to advise you that participating pensions will be increased by 1.91 % effective January 2002. If you retired during 2001, you will receive a pro rata increase in proportion to the number of months you were retired based on an annual rate of 1.91%.
Our objective is to try to protect pensioners against inflation (but not beyond it) to the extent made possible by excess interest earnings accumulated in the Pension Plan fund, and as permitted by Income Tax Regulations. This year's increase reflects the Consumer Price Index as at October 31, 2001.
Just to remind you, we are now using the pension fund investment return in excess of 4% instead of the company earned rate (annual earnings on its life insurance and annuity funds) in excess of 4% for years after December 31, 2000. The company earned rate is based on international business factors (e.g. Canada, U.S.,U.K., Ireland) and was seen to be no longer applicable when determining the increases for Canadian pensions. In addition the pension fund investment return is a better measure of the fund's ability to handle the cost of the increases than the company's earned rate of return.
Attached please find a copy of the indexing formula for your reference.
If you have any questions concerning your increase, please call Christine Andrews, Senior Pension Specialist at (416) 597-1440, Ext. 5162.
Yours sincerely,
Diane Barsoski
Vice-President and
Director, Human Resources
January 22, 2003
TO: CANADA LIFE PENSIONERS IN CANADA
It is my pleasure to advise you that participating pensions will be increased by 3.21 % effective January 2003. If you retired during 2002, you will receive a pro rata increase in proportion to the number of months you were retired based on an annual rate of 3.21 %.
Our objective is to try to protect pensioners against inflation (but not beyond it) to the extent made possible by excess investment returns accumulated in the Pension Plan fund, and as permitted by Income Tax Regulations. This year's increase reflects the Consumer Price Index as at October 31, 2002.
As mentioned above, a key factor in determining annual pension increases, is excess investment returns. Our plan provides that we try to reflect inflation to the extent we have excess investment returns. Current market conditions make generating excess investment returns very difficult and volatile. For the past two years, the average fund investment return was defined as the average investment return from the first five years of the preceding six years, less 4%. Effective January 1, 2003, we have amended the pension plan, extending the length of the averaging period to the first fifteen years of the preceding sixteen. Lengthening the averaging period to fifteen years will have the effect of smoothing volatile investment results.
Attached please find a copy of the revised indexing formula for your reference.
If you have any questions concerning your increase, please call Helen Liu, Senior Pension Specialist at (416) 597-1440, Ext. 5162.
Yours sincerely,
Diane Barsoski
Senior Vice-President
Human Resources
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CANADA LIFE CANADIAN EMPLOYEES PENSION PLAN
INDEXING FORMULA EFFECTIVE JANUARY 1, 2003
The formula to determine the annual amount of indexing is as follows:
the lesser of:
the cumulative* increase in the Consumer Price Index (CPI); and
the cumulative* excess of the Current Year Rate for Indexing over 4.0% with the Current Year Rate for Indexing being defined for years after December 31, 2002 as the average investment return of the pension fund during the first 15 years of the preceding 16 years. (i.e. on January 1, 2003 the fifteen year average used would be 1987 to 2001. The Year 2002 is not used in the fifteen year average as those results are not available in time for the January 1 increase.)
*cumulative: measured from your pension commencement date
For example: If after ten years, the cumulative CPI over that period was 23% and the cumulative excess investment return was 30%, the member's monthly pension over the ten years would have been increased by 23%.
Note: Increases based on the CPI rate would be used in an economic cycle where inflation is low and investment returns are higher. Increases based on the excess investment returns would apply in periods when inflation is higher than the fund's investment returns.