Retirees' Newsletter

Faculty and Librarian Retirees' Association, University of Windsor

Sep/Oct 1994 Issue 9

Annual pension changes were announced in September, retroactive to July 1, 1994.

This year the change was quite good for those still on Minimum Guarantee, and not good at all for those on Money Purchase.

The Minimum Guaranteed Benefit, effective July 1, 1994, was increased by 1.028% to reflect the increase in the Consumer Price Index in the preceding fiscal year.

The story for those receiving Money Purchase pensions is not so pleasant. The rate of return of investing the money in the Pension Fund was only 2.4%. When the 6% for servicing the fund is deducted from this, there remains a net loss of 3.6%.

Thus all Money Purchase pensions have been reduced. Retirees who had been less than 3.6% above the Minimum Guarantee were reduced to the Minimum Guarantee. Those that were more than 3.6% above the Minimum Guarantee were reduced by 3.6%. These reductions were retroactive to July 1, 1994.

It is discouraging that after three years of substantial increases in the rate of return of investment of the money in the Pension Fund, we should be faced with such a substantial decrease. However, this is a reflection of the bad state of the investment markets due to the economic recession from which we are emerging. Hopefully, next year we shall be on track again with an increase.

There was a provision in the Plan to provide for averaging out the increases and decreases to Money Purchase pensions so that in any one year there would not be a decrease. However, this provision has been eliminated due to government regulation, and so those on Money Purchase pensions have to take the increases or decreases in the years in which they occur. Fortunately, the increases have outnumbered the decreases and, hopefully, they shall do so in the future.

ARE YOU UNSURE WHETHER YOU ARE ON THE MINIMUM GUARANTEE OR THE MONEY PURCHASE PENSION? To enable you to determine this, we have reproduced below, the chart (headings only) that was included in a recent letter from the U. to all retirees regarding these changes. Our only purpose for including it here is to enable you to determine for yourself whether you are on Min. Guarantee or Money Purchase.

If A exceeds B, you were on Minimum Guarantee on July 1, 1993. If B exceeds A, you were on Money Purchase on July 1, 1993. If X exceeds Y, you were on Minimum Guarantee on July 1, 1994. If Y exceeds X, you were on Money Purchase on July 1, 1994. By the way, if you've gotten a bit rusty on how the min guarantee and money purchase components are arrived at, ask about a copy of The Retirees' Handbook, prepared by the Association. Pick one up at the meeting; or write to the Association and we'll mail one to you.

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