RPI to CPI Early Day Motion 1032

JamesU

Old_Slaphead wrote: »

Because my comments related to an article in the Guardian quoted RipOffs post #978 and I am disputing RipOff's interpretation of these figures.....

That's fair enough, the post did give the impression the £100Bn savings related to BT alone, when in reality it relates to the money taken by the Government from pensioners across the whole of the private sector with the switch to CPI.

But your comment below is incorrect:

Old_Slaphead wrote: »

No it's not - the £100bn quoted covers the whole of the final salary pension industry (mainly public sector).

The DWP impact assessment on the switch to CPI does not include any of the cuts to the public sector pensions. This was mentioned in post #886 quite some time ago, and if you read the DWP impact assessment carefully (link below), on the bottom of page 6 it states:

(1) For the avoidance of doubt, this impact assessment does not consider any impact of the change in the basis of indexation used for public service pensions

http://www.dwp.gov.uk/docs/cpi-private-pensions-consultation-ia.pdf

When the Parliamentary Work and Pensions Comittee questioned Steve Webb on the impact of CPI on public sector pensions in March 2011, they were referred to the DWP impact assessement published in Feb 2011 (first link above) and the final report by Lord Hutton that was pending in March 2011. But neither of these reports actually have any impact analysis on public sector pensions (for those OPs interested, see Questions 35-37 in the Parliamentary text below):

http://www.publications.parliament.uk/pa/cm201012/cmselect/cmworpen/846/11030902.htm

Hugheskevi's calculations on the reduction to private and public sector pensions at £83Bn and £139Bn respectively (post #983) look like pretty good estimates to me based on the data at hand. However, in the longer term I feel the figures may well be conservative estimates because they rely on a long term RPI/CPI differential of 0.75% (Lord Hutton's interim report, 0.75%, hence a 15% reduction in pensions) whereas the OBR suggests a higher long term RPI/CPI differential of 1.2% (see OBR link below, page 70 for OBR reasons for an increase to 1.2%, and other OBR/ONS changes in posts #953 and #957).

http://budgetresponsibility.independent.gov.uk/wordpress/docs/economic_and_fiscal_outlook_23032011.pdf

JamesU

Old_Slaphead

I don't dispute your sentiments.

I have a problem if these RPI guarantees were to last another 30 or 40 years. The world's a'changing - people are living longer - the costs to be borne by future generations are unfair (to them) and unaffordable - nothing lasts forever.

In the case of the public sector & ex- privatised utilities these benefits were granted by 'bosses' who had a vested self interest in maintaining the status quo whether it was financial (ie they benefited themselves), vote catching or simply weak management.

Personally I would keep the RPI guarantees on the basis that this was instead of any future pay increase which was not contractually guaranteed. Employees would then have a choice - pay now or deferred pay later.

Old_Slaphead

JamesU wrote: »

Hugheskevi's calculations on the reduction to private and public sector pensions at £83Bn and £139Bn respectively (post #983) look like pretty good estimates to me based on the data at hand. However, in the longer term I feel the figures may well be conservative estimates because they rely on a long term RPI/CPI differential of 0.75% (Lord Hutton's interim report, 0.75%, hence a 15% reduction in pensions) whereas the OBR suggests a higher long term RPI/CPI differential of 1.2% (see OBR link below, page 70 for OBR reasons for an increase to 1.2%, and other OBR/ONS changes in posts #953 and #957).

JamesU

We seem to be arguing at cross purposes here.

I am trying to substantiate the Guardian's comments on the coverage (ie public & private FSS) and cost of RPI/CPI indexing OVER 15 YEARS (their statement not mine) whereas others are arguing a substantially increased cost but over a completely different period. They may well be correct, who knows, that but that wasn't what my response was about. I also didn't mention the impact assessment other than to comment on hugheskevi's calculations.

I'm still saying, based on crude estimates that the £100bn cost (as per Guardian) over the next 15 years relates to both public & private FS pensions. You, and others, seem to dispute this, suggesting it's private sector only - can you provide any supporting evidence ?

BTW I have browsed the DWP 60 year impact assessment on private schemes and that supports my argument - how can something costing £83bn over 60 years cost £100bn over 15 years ?

JamesU

Old_Slaphead wrote: »

We seem to be arguing at cross purposes here. I am trying to substantiate the Guardian's comments on the coverage (ie public & private FSS) and cost of RPI/CPI indexing OVER 15 YEARS (their statement not mine) whereas others are arguing a substantially increased cost but over a completely different period. They may well be correct, who knows, that but that wasn't what my response was about. I also didn't mention the impact assessment other than to comment on hugheskevi's calculations.

Have not read the Guardian article you mention so cannot comment on that, do you have a link to it? And are you referring to the cost of pensions or the cuts to pensions with the switch to CPI? I was trying to clarify any confusion on the latter.

Old_Slaphead wrote: »

I'm still saying, based on crude estimates that the £100bn cost over the next 15 years relates to both public & private FS pensions. You seem to dispute this - can you provide any evidence to the contrary ?

I am not trying to argue anything, just clarifying what cuts are occuring and where (private or public) with the switch from RPI to CPI as in my last post. That has nothing to do with looking into the combined cost of private and public sector pensions. Surely private sector pensions are not an expense to the Government or taxpayer? Or does the Government still have some long term pension liability to companies such as BT, BA, NG etc that I am not aware of from before their privatisation? You have lost me on this part, not sure what evidence you want and for what reason? If you want evidence on the likely cuts to private and public pensions that has already been discussed and clarified.

Old_Slaphead wrote: »

BTW I have browsed the DWP 60 year impact assessment on private schemes and that supports my argument - how can something costing £83bn over 60 years cost £100bn over 15 years ?

Really do not mean to be rude SlapHead, but I haven't got a clue what you are trying to say in this last part. Are you referring to the annex C impact assessment in the link below, what is it that you are saying costs £83Bn over 60 years and £100Bn over 15 years and where is this discussed?

http://www.dwp.gov.uk/docs/cpi-private-pensions-consultation-ia.pdf

JamesU

hugheskevi

The Guardian article is here, linked by Ripoff earlier.

The most relevant bits are:

Investors could benefit from a £100bn windfall over the next 15 years following a government switch to a lower measure of pension inflation that has given BT a £4bn-plus boost to its finances.

Trask said the government, which estimated the private sector would save £83bn over 15 years, had grossly underestimated the savings.

The DWP Impact Assessment of savings to private sector of the RPI/CPI change says that you would expect labour markets to adjust over 15 years (ie workers pay increases to make up for lower pension benefits, returning their overall remuneration to its former level, and this occurs over a 15 year period).

Therefore, at the end of 15 years all the savings have materialised. Hence why it is a £83bn saving over 15 years.

The Guardian article (in my opinion) takes the commentary of Mr Trask (saying the Govt. estimates of savings to private sector are underestimated) to argue that the savings to shareholders will be £100bn over 15 years (ie £83bn plus a bit more to account for an alledged underestimate).

Hence I think the Guardian article is referring to savings in private sector only.

This does raise a bit of an interesting, but not particularly important, nuance. As private sector pensions are funded, any reduction in liabilities impacts now by a reduced deficit/increased surplus, which in turn reduces the demands on the sponsoring employer. As public sector pensions are unfunded, savings only arise as pension payments fall due. So there are completely different saving profiles in the private and public sectors.

JamesU

hugheskevi wrote: »

The Guardian article is here, linked by Ripoff earlier.

This does raise a bit of an interesting, but not particularly important, nuance. As private sector pensions are funded, any reduction in liabilities impacts now by a reduced deficit/increased surplus, which in turn reduces the demands on the sponsoring employer. As public sector pensions are unfunded, savings only arise as pension payments fall due. So there are completely different saving profiles in the private and public sectors.

Thanks for clarifying this confusion.

For sure, the Guardian article refers only to savings from the cuts in private sector pensions and does not include cuts to the public sector pensions. The BBC reported the initial £83Bn cut to private sector pensions in February when the revised DWP assessment was published (link below). The "top up" of the estimate of cuts in the private sector from £83Bn to £100Bn by the actuaries in the Guardian article which you mention looks perfectly justifiable given the DWP impact assessment was estimated based on an RPI/CPI differential of 0.87%, whereas the OBR is now suggesting a long term RPI/CPI differential of 1.2%.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/02/rpi_to_cpi_costs_pension_saver.html

JamesU

Ripoff_2

BT Pensioners may wish to be aware of the following but of course any one affected could well donate should they so wish you do not have to be a member of the NFOP to donate to the cause.

RPI CPI Update N.F.O.P Fighting Fund

A Judicial Review of the decision by the Secretary of State to switch to the CPI has been lodged with the High Court. It has been made by the TradesUnions GMB, Prospect, First Division Association (FDA), Police Federation of England and Wales and by the Civil Service Pensioners' Alliance (CSPA) and the National Federation of Retired Police Officers (NARPO)..

The Federation has been very active in lobbying to retain the RPI for pension increases. We have had legal advice relating to the RM and BT Pension schemes and to any move by the Government to allow schemes to modify their rules to use the CPI, even if the RPI is written into the rules.

The N.F.O.P Executive Committee would like to take further action on its members' behalf to protect their pensions and seek to join in with the Judicial Review.

However - as with any legal action - it costs.

We have written to our Branches to seek their support on a voluntary basis. If any of you would like to make a personal contribution to help the cause it will be very much welcomed. Please send a cheque made out to N.F.O.P and indicate in a covering letter that it is for the Fighting Fund.

N.F.O.P,
Unit 6 Imperial Court,
Laporte Way,
Luton,
Bedfordshire
LU4 8FE

A separate fund will be established and reported separately in our Annual Accounts. www.nfop.co.uk

Ripoff_2

This really does make my blood boil, perhaps the link needs sending to your MP to ask the question "WHY" and highlight the hypocrisy here!

The now fully funded Bank of England pension fund has ignored the Chancellors calls for public sector restraint in annual pension reviews by sticking with RPI and snubbing CPI.
I say now fully funded because the taxpayer needed to make a generous donation of £42.5 Million to ensure assets and liabilities matched. As the Governor moved into his second 5 year term it was disclosed that his pension on retirement will be just short of £200,000 per year generously uplifted each year by RPI.
What is unclear is the mechanism whereby other public sector workers were forced into accepting CPI annual increases while the Bank of England pension fund got away with sticking with RPI.

Perhaps someone could explain WHY the Bank of England pension scheme are able to index their pensions by RPI but that BT pensions, many other private pensions and all other public sector pensions are only being indexed by the lesser CPI, due to the Governments uprating change from RPI to CPI. Are the BOE not the Public Sector?

[URL="mhtml:{6EF71D81-FCE8-447B-947D-380BDD9A9C3B}mid://00000097/!x-usc:http://www.24dash.com/news/central_government/2011-05-31-Bank-of-England-Pension-Fund-Ignores-CPI"]http://www.24dash.com/news/central_government/2011-05-31-Bank-of-England-Pension-Fund-Ignores-CPI[/URL]

Andy_L

I suspect that, like the other schemes that haven't moved from RPI to CPI, their scheme rules to not state increase in accordance with the various pensions acts but have an RPI increase written into the rules

WaxiesDargle

Andy_L wrote: »

I suspect that, like the other schemes that haven't moved from RPI to CPI, their scheme rules to not state increase in accordance with the various pensions acts but have an RPI increase written into the rules

the fire brigades and police pension schemes have RPI written into the rules but it is changing over to CPI...a legal challenge is taking place