Why your commuted value isn't a fixed number
Many people are surprised to learn that their commuted value is not a static figure. It changes monthly — and in some interest rate environments, the swing from one month to the next can be significant enough to affect a major financial decision.
The reason is that your commuted value is a present value calculation — it converts a stream of future pension payments into a single lump sum today. And the discount rates used in that conversion are set fresh each month by the Canadian Institute of Actuaries under the CIA §3500 standard.
When those rates rise, your CV falls. When they fall, your CV rises. Understanding why — and when — is the key to making a well-timed decision.
The two CIA interest rates: i₁ and i₂
The CIA §3500 standard uses a two-tier interest rate structure. Each tier applies to a different portion of your expected pension payment stream:
Short-term rate
Applies to pension payments expected within the first 10 years after your earliest unreduced retirement date (EURD). Typically derived from Government of Canada bond yields at shorter durations.
Long-term rate
Applies to pension payments expected beyond 10 years after your EURD. This is the dominant rate for most members — and the one that moves your CV the most. Derived from longer-duration bond yields.
The CIA publishes updated i₁ and i₂ rates on the first business day of each month. These rates are based on Government of Canada bond yields from the previous month, adjusted by a prescribed formula.
Why i₂ matters most
For most pension members — particularly those who are younger at termination and have many years before their earliest retirement date — the vast majority of their pension payments fall beyond the 10-year threshold. This means i₂ drives most of their commuted value calculation.
A change of just 0.25% in i₂ can move a typical commuted value by 3–6%, which on a $500,000 CV translates to $15,000–$30,000. A full percentage point move can shift values by 12–20%.
The inverse relationship: When interest rates rise, commuted values fall — and vice versa. This is because higher discount rates make future pension payments worth less in today's dollars. In a falling rate environment, commuted values increase.
Recent CIA rate history: March 2025 – February 2026
The table below shows the official CIA §3500 i₁ and i₂ rates for the 12 months ending February 2026, sourced directly from the CVCalculator app's rate database. Green values represent the most favourable rates for commuted values (lowest i₂); red values represent the least favourable.
| Month | i₁ (0–10 yr) | i₂ (10+ yr) | CV impact vs. Mar 2025 |
|---|---|---|---|
| Mar 2025 | 3.6% | 4.5% | Baseline (CV peak) |
| Apr 2025 | 3.7% | 4.8% | ↓ ~4% |
| May 2025 | 3.6% | 4.9% | ↓ ~6% |
| Jun 2025 | 3.7% | 4.9% | ↓ ~6% |
| Jul 2025 | 3.8% | 5.0% | ↓ ~8% |
| Aug 2025 | 3.9% | 5.1% | ↓ ~10% |
| Sep 2025 | 3.8% | 5.3% | ↓ ~12% |
| Oct 2025 | 3.5% | 5.1% | ↓ ~10% |
| Nov 2025 | 3.6% | 5.2% | ↓ ~11% |
| Dec 2025 | 3.7% | 5.3% | ↓ ~12% |
| Jan 2026 | 3.8% | 5.4% | ↓ ~14% (CV trough) |
| Feb 2026 | 3.7% | 5.3% | ↓ ~12% |
Source: CIA §3500 / FTSE Russell. CV impact estimates assume a $500,000 baseline CV with payments weighted toward the long-term tier. Rounded to nearest 1%. Updated monthly — download CVCalculator for the current month's rate.
The trend over this period is significant: i₂ climbed from 4.5% in March 2025 to a peak of 5.4% in January 2026 — a 0.9 percentage point increase that reduced a typical $500,000 commuted value by approximately $50,000–$70,000 from its early-2025 high. Members who had flexibility and terminated in the first quarter of 2025 captured a materially better outcome than those who left in late 2025 or early 2026.
Note that i₁ has remained comparatively stable throughout this period (3.5–3.9%), confirming that the dominant driver of CV movement has been the long-term rate — exactly as the two-tier structure predicts.
How the blending works
Your commuted value isn't simply calculated at your EURD. The CIA §3500 December 2020 standard uses a blended approach between two dates:
- EURD (Earliest Unreduced Retirement Date) — the earliest date you could receive your full unreduced pension
- Optimal Retirement Date (ORD) — the date that produces the highest commuted value, based on current rates
The blending weights these two dates based on a formula that considers your age, the plan's benefit structure, and current interest rates. CVCalculator implements this blending automatically.
A practical example
Suppose a member has an accrued pension of $30,000 per year with an EURD at age 60. In a month when i₂ is 3.5%, their commuted value might be approximately $520,000.
If i₂ rises to 4.5% the following month — a full percentage point increase — the same pension could produce a commuted value closer to $450,000. That's a $70,000 swing on the same underlying pension, caused entirely by a change in the discount rate.
This is why the timing of your departure date can be as financially meaningful as many years of salary negotiation.
Now consider a member who is only 3 years away from their EURD at age 60, with an accrued pension of $25,000 per year. Because most of their expected pension payments fall within the 10-year window, i₁ — not i₂ — is the dominant rate in their calculation.
In a month when i₁ is 3.5% (October 2025), their commuted value might be approximately $310,000. If i₁ rises to 4.0%, the same pension could produce closer to $290,000 — a $20,000 swing, still meaningful but far smaller than the i₂-driven example above.
The takeaway: the further you are from your EURD, the more your CV is driven by i₂. The closer you are, the more i₁ matters. Both rates are published monthly and both are tracked in CVCalculator.
Should you try to time the rates?
It's tempting to try to time your departure around favourable CIA rates — and in some cases it's worth considering if you have flexibility. CVCalculator's 12-month CV history feature shows how your commuted value has shifted with the rates over the past year, helping you understand the magnitude of the rate effect on your specific situation.
However, timing the rates perfectly is impossible, and the decision to take your commuted value involves far more than maximizing your CV in a single month. Job satisfaction, career trajectory, health benefits, and the tax impact of a large lump sum all matter — understanding all your options when you leave is the essential first step before rate-timing enters the conversation.
That said, if you're within a few months of your planned departure and rates are moving significantly, it's worth running the numbers both ways before committing to a specific termination date.
How CVCalculator uses CIA §3500
CVCalculator implements the full CIA §3500 December 2020 standard — the same framework your pension administrator uses. This includes:
- The two-tier i₁ and i₂ rate structure
- CPM2014 mortality tables with CPM-B improvement scale
- The blended EURD and Optimal Retirement Date methodology
- ITA §8517 LIRA transfer limit calculation
- Survivor and bridge benefit adjustments
The 12-month CV history feature updates automatically each month as the CIA publishes new rates, showing you how your commuted value has moved over the past year and which month was optimal.
Track your commuted value month by month
CVCalculator's 12-month history shows exactly how CIA rate changes have moved your CV over the past year — so you can make a well-timed decision.
Where to find the current CIA rates
The CIA publishes monthly commuted value interest rates on its website at cia-ica.ca. Rates are typically released on the first business day of the month and apply to terminations occurring during that calendar month.
CVCalculator sources these rates directly and updates monthly so you always have current figures available when you run your calculation.