Pensions and Allowances Annual Adjustment Regulations: SOR/2026-226

Canada Gazette, Part II, Volume 160, Number 22

Registration
SOR/2026-226 October 23, 2026

PENSION ACT

P.C. 2026-1013 October 23, 2026

Her Excellency the Governor General in Council, on the recommendation of the Minister of Veterans Affairs, makes the annexed Pensions and Allowances Annual Adjustment Regulations under subsections 75(1)^{footnote a} and (3)^{footnote b} and sections 91.1^{footnote c} and 91.3c of the Pension Act^{footnote d}.

Pensions and Allowances Annual Adjustment Regulations

Definition of Act

1 In these Regulations, Act means the Pension Act.

Rounding of amounts

2 An amount determined under paragraph 75(1)(a) or (b) or subsection 75(3) of the Act must be rounded to the nearest cent or, if the amount is equidistant between two cents, to the higher of them.

Calculation — paragraph 75(1)(a) of Act

3 For the purpose of paragraph 75(1)(a) of the Act,

• (a) each of the Consumer Price Indexes referred to in subparagraph 75(1)(a)(ii) of the Act must be rounded to one decimal place, with the digit at the first decimal place being increased by one if the digit at the second decimal place is 5 or more; and
• (b) the ratio between the Consumer Price Indexes must be expressed as a decimal number and rounded to three decimal places, with the digit at the third decimal place being increased by one if the digit at the fourth decimal place is 5 or more.

Calculation — paragraph 75(1)(b) of Act

4 For the purpose of paragraph 75(1)(b) of the Act,

• (a) the average annual gross composite wage of the categories of unskilled members of the federal public administration designated by the Minister is equal to the simple arithmetic mean — rounded to the nearest cent or, if it is equidistant between two cents, to the higher of them — of all those categories’ average annual gross wages, each of which is determined in accordance with paragraph (b);
• (b) each category’s average annual gross wage is equal to
  • (i) in the case of a category whose members’ pay is determined on the basis of an annual rate of pay, the simple arithmetic mean — rounded to the nearest cent or, if it is equidistant between two cents, to the higher of them — of the annual rates of pay for all the steps in that category’s pay scale, and
  • (ii) in the case of a category whose members’ pay is determined on the basis of an hourly rate of pay, the product of 2080 and the simple arithmetic mean — rounded to the nearest cent or, if it is equidistant between two cents, to the higher of them — of the hourly rates of pay for all the steps in that category’s pay scale; and
• (c) the income tax for a single person calculated in the province with the lowest combined provincial and federal income tax rate is the income tax for the most recent taxation year ending before the annual adjustment is made and is determined by the formula

  A × (B − C) + (D × (B − E))

  where

  A

  is the income tax rate set out in paragraph 117(2)(a) of the Income Tax Act for that taxation year,

  B

  is the average annual gross composite wage determined under paragraph (a),

  C

  is the basic personal amount, as defined in subsection 118(1.1) of the Income Tax Act and adjusted in accordance with section 117.1 of that Act, for that taxation year,

  D

  is the lowest of the provincial personal income tax rates for that taxation year, and

  E

  is the basic personal amount or equivalent for that taxation year for the province whose personal income tax rate is used for the purpose of D or, if multiple provinces share that rate, the highest basic personal amount or equivalent among those provinces.

Calculation — subsection 75(3) of Act

5 For the purpose of subsection 75(3) of the Act, the percentage by which the basic pension is adjusted is to be rounded to four decimal places, with the digit at the fourth decimal place being increased by one if the digit at the fifth decimal place is 5 or more.

6 The Pension and Allowance Adjustment Regulations^{footnote 1} are repealed.

Coming into force

7 These Regulations come into force, or are deemed to have come into force, on January 1, 2027.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Pension Act (the Act) provides for the basic pension and other pension and allowance amounts under the Act to be adjusted for inflation each year based on two methods of calculation. Updates to the Pension and Allowance Adjustment Regulations (the Regulations) are required to ensure the annual inflation adjustment under the wage rate method is clearly set out and that rounding rules and other calculations are consistent with Veterans Affairs Canada (VAC)’s accounting practices. The Regulations increase transparency and provide clarity for the application of the wage rate method.

Background

VAC supports the well-being of veterans and their families, and promotes recognition and remembrance of the achievements and sacrifices of those who served Canada in times of war, military conflict and peace. VAC administers the Pension Act to provide this support through the delivery of programs, such as disability benefits for eligible Veterans and other individuals who sustain service-related disabilities.

The following individuals may receive disability benefits under the Pension Act:

• Canadian Armed Forces members or Veterans,
• Second World War Veterans, including Merchant Navy Veterans and Allied Veterans, and Korean War Veterans; and
• survivors and dependents of the above individuals.

The basic pension is the maximum disability pension payable to Canadian Armed Forces members and veterans who have service-related disabilities and who are single with no dependents. The Pension Act and the Pension and Allowance Adjustment Regulations provide for the annual adjustment of the monthly basic pension and other pensions and allowances set out in Schedules I to III to the Act (i.e. disability pensions, pensions for death and allowances), using the greater result of two methods.

The first method uses a consumer price index (CPI) formula, which is widely accepted as an accurate, fair and transparent measure to ensure that benefits keep up with the cost of living.

The second method involves a wage rate calculation based on the salary of unskilled members of the federal Public Service and involves the calculation of an amount equal to an after-tax monthly average composite wage. The basic pension amount for a month under that method is the amount equal to one twelfth of the average annual gross composite wage, as of the thirty-first day of October of the year in which the adjustment is made, minus income tax for a single person calculated in the province with the lowest combined provincial and federal income tax rate.

The basic pension is the highest amount obtained from these two methods of calculation. All other pensions and allowances in Schedules I to III to the Act are adjusted each year at the same time and by the same percentage increase as the basic pension.

The Budget 2025 Implementation Act, No. 1, amended the Act to confirm the specific amounts of monthly basic pension and other monthly pensions and allowances payable under the Act for the period from April 1, 1985, to December 31, 2026. For that period of time, the basic pension amounts are set out in a schedule to the Act. As of January 1, 2027, the two methods of annual adjustment continue to apply as opposed to the basic pension amounts being set out in a schedule. For the purposes of the wage rate method of adjustment, a definition of province was also added to the Act. Regulation-making authorities were also added with respect to this method of adjustment.

Objective

To provide transparency and clarity regarding the annual adjustment calculations of the basic pension and other pension and allowance amounts.

Description

The Pension and Allowance Adjustment Regulations are replaced with new and more detailed provisions.

The Regulations maintain the necessary rounding rule for dollar amounts, but make it more explicit. Similarly, the rounding rule for the annual average CPI method, which compares year-on-year consumer price indexes, is expressed in more detail.

The Regulations also set out the method for the Department to determine the average annual gross composite wage for unskilled members of the federal public service, using categories that have multiple pay steps to consider as well as those that have hourly rates of pay. The Regulations also set out how to determine the income tax amount that is to be deducted from the average gross composite wage.

The Regulations also set the rounding rule for the percentage increase to the basic pension before it is applied to the other pensions and allowances.

Regulatory development

Consultation

The Regulations do not introduce new policy or change existing calculations, expand the scope of the legislative framework, or create new obligations but instead provide guidance with respect to existing calculation methods. The Department would not normally consult with the public on the annual adjustment methods or the resulting amounts. As a result there were no public consultations, and an exemption from prepublication in the Canada Gazette, Part I, was sought.

Indigenous engagement, consultation and modern treaty obligations

Following the completion of the assessment of modern treaty implications, no adverse impacts on potential or established Indigenous or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982 were identified.

Instrument choice

The Pension Act requires that two methods of adjustment be applied when determining the amount of the basic pension each year and the related increase to other pension and allowance amounts under the Act. The Act also specifies that the annual basic pension adjustment is to be calculated in the manner prescribed by the Regulations.

Regulatory analysis

Benefits and costs

The benefit of this proposal is that it increases transparency and clarifies the methods used for purposes of determining the annual adjustment to the basic pension through more detailed and specific rules on the rounding of numbers and percentages as well as by providing additional details about the wage rate method and calculations under that method. There are no incremental costs or implementation costs arising from this proposal.

Small business lens

Analysis under the small business lens concluded that the Regulations will not impact Canadian small businesses.

One-for-one rule

The one-for-one rule applies, as the proposal repeals an existing regulation and replaces it with a new regulatory title. There is no incremental change in the administrative burden on business, and no net increase or decrease in regulatory titles.

Regulatory cooperation and alignment

The Regulations do not have any impact on a work plan or commitment under a formal regulatory cooperation forum.

International obligations

The Regulations are not related to an international agreement or obligation.

Effects on the environment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that the proposal is not expected to have any positive or negative environmental effects.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for the Regulations. The calculation of the annual adjustment to the basic pension creates a percentage increase that applies equally to all the disability pension amounts and other related amounts received by the recipients. There are no differential impacts expected on amounts received by diverse populations.

Implementation, compliance and enforcement, and service standards

Implementation

The Regulations come into force on January 1, 2027.

Contact

Nigel Bruce
Director General
Strategic Planning, Results, and Cabinet Business
Telephone: 902‑218‑2456
Email: nigel.bruce@veterans.gc.ca