MSE News: Millions face cut in final salary pensions

Old_Slaphead

Interested_Taxpayer wrote: »

Oh yes they are. Lord Hutton who is conducting an enquiry into public sector pensions has said that public sector pensioners would be between 15% and 25% worse off over a life time by using the CPI. As an example, the average Civil Service Pension is currently £6700 a year with a quarter of them receiving less than £2000. Therefore, that group and many others in the Public Sector including the Armed Forces will be 'hit' very hard indeed.

The people who will be hardest hit will be those on deferred pensions (they've time to build up more pension entitlement), those retiring at 50/55/60 (it's way to early) and those on large pensions (they're the biggest beneficiaries anyway).

Those on £2000 will hardly notice until they're in their 80s. The loss will be approx 0.7%pa cumulative - the 15-25% only occurs after 25 years and by then, they will be heavily reliant on public services like NHS or subsidised carehomes. (so the extra couple of hundred quid would have been paid to LA for care anyway!)

Question - all these thousands of people on £2k public sector pensions - what is their average FTE length of service?

Ripoff_2

I have been doing some calculations on this to put it into perspective. Basing the difference between RPI to CPI at 0.75% and an inflation rate on average of 3.1% RPI for the next 30yrs and CPI at .75% less then RPI. The figures are quite astounding.

a £2000 pension after 20 years the loss is £4,903, loss £44 per mth, after 30 years the loss is £12,761, loss £86 per mth.
a £6700 pension after 20 years the loss is £16,425, loss £148 per mth, after 30 years the loss is £42,750, loss £287 per mth.
a £10000 pension after 20 years the loss is £24,516, loss £221 per mth, after 30 years the loss is £63,806, loss £428 per mth.

So here I am assuming that over the period the inflation stays on average at 3.1%RPI and 2.35%CPI. If the gap between RPI and CPI reduces then the loss will reduce however if the inflation rate goes up the loss is greater. For people on the higher pensions, then their loss will be far greater but even people on modest pensions will be effected greatly. These figures are valid for Private, public and state pensions based on using CPI.

Just to clarify the loss per month figure, it's the RPI monthly figure minus the CPI monthly figure, ie. the difference per month that is lost.