Oct 27, 2026
Cost of living fears aren’t just a here and now problem for Canadians. According to a recent Bank of Canada survey release, Canadian financial concerns aren’t solely focused on today’s grocery bill — but on the possibility that prices may keep climbing for years.
In its latest quarterly survey of households, the Bank of Canada found Canadians expect inflation to climb in the next five years — rising to 3.91%. That’s almost twice the central bank’s 2% target and the highest reading in roughly four years.
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For retirees, that matters. While some retirement income rises automatically with prices — such as indexed to inflation government income, including Old Age Security (OAS) payments and Guaranteed Income Supplement (GIS) payments — some retirement income does not. And that gap can quietly shrink what a monthly budget actually buys.
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Why are Canadians bracing for higher inflation?
The BoC released its third-quarter Canadian Survey of Consumer Expectations on Oct. 19. Long-term expectations on inflation jumped to 3.91% from 3.39% the previous quarter — the highest level since the second quarter of 2022, according to Bloomberg.
The primary reasons for the increased inflation projects are tariffs and trade tensions, followed by energy prices. The BoC analysis confirmed that long-term inflation expectations “have risen alongside the new tariffs and the recent rebound in energy prices.”
According to the BoC report, inflation began to tick up at the start of trade tensions; however, persistent inflation expectations moved higher when the Canada-U.S. trade talks broke down in late August. Statistics Canada price data backs this up . According to StatCan, the Consumer Price Index (CPI) rose 3.1% year over year in September, driven by a 27.8% jump in gasoline prices. Fuel oil, still used to heat many homes in Atlantic Canada, was up 57.8%. And with ongoing Straight of Hormuth tensions, inflated fuel costs doesn’t seem to have an end in sight.
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Why worry if CPP and OAS already rise with inflation?
While government income support, like OAS, GIS and the Canada Pension Plan (CPP) do rise with inflation, but there’s a lag.
OAS is reviewed four times a year and rose 1.4% for the October to December 2026 period — a 3.0% gain over the past year. That means the maximum monthly payment is now $762.50 for seniors aged 65 to 74 and $838.75 for those 75 and older.
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On the other hand, CPP adjusts only once a year, in January — and the adjustment is based on the previous year’s prices. This year, CPP benefits rose 2.0%. That means when inflation speeds up partway through the year, CPP doesn’t catch up until the following January.
Which retirement income loses ground to inflation?
When income isn’t indexed to inflation and stays fixed, in dollar terms, it ends up buying a little less every year as prices rise. Common examples include:
- Workplace pensions with partial or no indexing
- Annuities bought without an inflation-protection option
- Guaranteed investment certificates (GICs) locked in at lower rates
- Set-dollar withdrawals from a registered retirement income fund (RRIF)
For retirees, how does this impact their retirement income? Let’s assume you have a $2,000 monthly pension with no indexing. In five years, when inflation moves to 3.91%, that same monthly pension would buy roughly $1,650 of goods and services — a 17.5% decrease in purchasing power.
Even non-retirees will feel this pinch
Turns out even working Canadians will feel the pinch of creeping inflation. According to the BoC survey, households expect their income to grow just 2.13% over the next year — about half the 4.03% they expect prices to rise.
That squeeze will mean households will need to continue cost-saving measures, if possible, or adjust additional spending or saving.
What to do now
- Sort your income: list each source as indexed, partly indexed or fixed
- Read your pension’s fine print: your plan booklet explains whether payments rise with prices and by how much
- Find your personal inflation rate: track what you spend on heating, gas, groceries and insurance, since your costs may rise faster or slower than the national CPI
- Weigh when to start benefits: CPP grows 0.7% for each month you delay past 65, up to 42% at 70, while OAS grows 0.6% a month, up to 36% at 70 — and the larger payments stay indexed for life
- Ladder your GICs: staggered maturities let you reinvest at higher rates if they climb
- Check for the GIS: single seniors with annual income under $23,112 may qualify for up to $1,138.90 a month through the Guaranteed Income Supplement (GIS)
- Review your growth mix: a retirement that could last 25 years or more may need some investments that can outpace inflation, and an accredited financial adviser can help
Survey methodology
The Bank of Canada’s Canadian Survey of Consumer Expectations was conducted through an online panel from Aug. 5 to 27, 2026, with follow-up phone interviews from Aug. 24 to Sept. 4, 2026. About three-quarters of responses were collected before Canada-U.S. trade talks broke down on Aug. 21.
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Romana King, Senior Editor at Money.ca, also writes for various North American publications and the RKHomeowner blog. Her book, House Poor No More, is an Amazon bestseller and five-time award winner, including the 2022 New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award.
