Tax Adjustments Impacting Your 2026 Net Pension Payments
Starting in January 2026, retired members residing in Alberta may notice that their net pension payment is lower than it was from July to December 2025, despite the recent cost-of-living adjustment (COLA).
This decrease in net pension payment is due to a change in the Alberta tax rate applied to pension payments. In 2025, the Government of Alberta announced a new Alberta tax rate of 8% on the first $60,000 of an individual’s taxable income.
ATRF deducted taxes for retired members residing in Alberta in accordance with the Government of Canada’s Payroll Deductions Formula guide, which was as follows.
- For the first six months of 2025, pension payments were taxed at an Alberta tax rate of 10%.
- For the remaining six months of 2025, a prorated Alberta tax rate of 6% was applied.
This resulted in an overall effective Alberta tax rate of 8% being applied to your pension payments for the 2025 calendar year. The adjustment from the 10% Alberta tax rate to the prorated 6% in July 2025 increased net pension payments for Alberta retired members during the second half of 2025.
Starting January 2026, the full annual Alberta tax rate of 8% applies. This change from 6% to 8% tax rate may exceed the COLA increase, resulting in a lower net pension payment.
To illustrate the calculation, refer to the example below. For your personalized pension payment information, please log in to your MyPension account or refer to your Pension Information Statement, available in January.
| Category | Jan-June 2025 | July-Dec. 2025 (Prorated) | Jan. 2026 |
|---|---|---|---|
| Gross Annual Pension | $42,500.00 | $42,500.00 | $43,095.00 |
| Gross Monthly Pension | $3,451.67 | $3,451.67 | $3,591.25 |
| Federal Tax Rate | 15% | 14% | 14% |
| Federal Tax (Monthly) | $531.25 | $495.83 | $502.78 |
| Alberta Tax Rate | 10% | 6% | 8% |
| Alberta Tax (Monthly) | $354.17 | $212.50 | $287.30 |
| Total Tax (Monthly) | $885.42 | $708.33 | $790.08 |
| Net Monthly Pension | $2,656.25 | $2,833.34 | $2,801.17 |
We want to reassure you that your pension has been calculated correctly and that your pension benefit increased in 2026 with COLA. Any reduction in your net pension payment is a direct result of the increase in Alberta tax rates from the last six months of 2025.
Taxes withheld from pension payments are estimates and may not match your final tax obligation. For advice specific to your personal tax situation, please consult a tax professional or contact the Canada Revenue Agency.
Please visit our Taxes and Your Pension webpage for information about calculating income withholding tax and changing tax information.
We are available to answer any questions through phone or email at retiredmember@atrf.com, or 780-451-4166.
Frequently Asked Questions (FAQ)
Why did my net pension payment decrease in January 2026 if there was a cost-of-living adjustment?
A cost-of-living adjustment (COLA) was applied to pensions effective January 1, 2026, and your gross pension benefit increased; however, the Alberta tax rate applied to pension payments also increased at the start of the year compared to what was applicable in the last six months of 2025.
The Alberta taxes withheld exceeded the COLA increase, potentially resulting in a lower net payment.
Was my pension calculated correctly?
Yes. Your pension benefit increased in 2026 with COLA, and your pension benefit was calculated correctly. The change you see in your net pension payment reflects how Alberta tax is withheld in 2026 and does not affect your pension entitlement.