RPI to CPI Early Day Motion 1032

Ripoff_2

WHAT’S THE DIFFERENCE BETWEEN RPI AND CPI?
THE Consumer Price Index excludes payments and council tax, so it’s generally lower.

WHY DOES THAT MATTER?
OVER the past 22 years CPI has, on average, been 0.75% lower than RPI. This means people receive smaller increases in their pension.

0.75%? THAT DOESN'T SOUND MUCH
TRUE, but the effect multiplies as every year’s increase is not only smaller but based on a lower figure.

WHAT EFFECT COULD IT HAVE?
SOMEONE with the average public sector pension of £7,800 would be getting a £17,884 a year in 25 years if RPI goes up by between 3.1% and 3.6% over the next five years – as the Office of Budget Responsibility predicts – and 3.5% thereafter. It falls to £14,735 if using CPI.

THAT’S JUST £3,000 DIFFERENCE
IT soon adds up. It amounts to £33,377 less over 25 years or more than four years’ worth of pension payments!

IS THERE ANYTHING I CAN DO?
IF you are still working you may pay in extra money – if allowed – or make additional private investments.

WILL IT HIT PRIVATE PENSIONS?
YES. Firms will be allowed to switch to CPI unless the scheme rules forbid it or specify they must use RPI.

WHAT ELSE CAN I DO?
Ask your MP to sign EDM 1032, Join the protest March on 1st March in London, write to the Pensions Minister Steve Webb, use your vote wisely, support the TUC march on 26th March, and remember you will still will be being cheated at the next general election, because this change is for LIFE, as it now stands.

Prof_as_was

teacher_retired wrote: »

Incidentally do they need to get the change through the house before they can start paying the lower rate in April? Does anyone know?

Yes, they do, in time for the Budget, it's in process now, and whatever may be said, it's critical Govt majority business, and will pass in the next week or two.

Prof_as_was

About some recent debate on who really pays for unfunded (sometimes called pay-as-you-go) public sector pension schemes – NHS particularly talked about here recently – and the cost to the taxpayer.

From the beginning of these schemes, the contributions were used as current year revenue, and thus reduced each year’s tax burden. For a while, the annual payouts were less than the contributions, and everybody was happy, short-term thinking prevailing as ever,. Then for a while it varied from year to year. Sometimes there was the surplus profiting the taxpayer, sometimes not, and the taxpayer lost out a bit. So the official rationale became ‘its OK, swings and roundabouts, it evens out’. I don’t know if figures exist to show how this worked out exactly over time until the 1970s. But by then, as the balance of paying in and drawing out changed, it began to look as if the tax-payers contribution, always small and hitherto balanced off, was becoming permanent. So there was a big review, renegotiation, and legislation – not to put an end to unfunded pensions, which would have been better government – but to ensure that the taxpayer didn’t permanently or significantly pay these pensions. Contributions and payouts were brought back into general balance, and again everybody lived happily for a while. But not alas ever after, because longevity etc brought the question to the fore again. By the first decade of the 21st century, it seemed that the taxpayer might again be taking a hit. Of course the tax payer doesn’t want that. What astonishingly escapes the attention of the indignant party is that the Treasury doesn’t want it, won’t have it. What happened was that there was another round of negotiated adjustments 2007-8. Maybe its memory and awareness of that moment and the discussion of it that leaves so many of the public wrongly convinced that the tax-payer bears the cost of public sector pensions. Maybe the public imagination was too incensed by the need for something to be done to notice that something was done, in good time.

So, the outcome of the 2008 negotiations?
“By making changes in 2007 and 2008 to pension schemes of NHS staff, civil servants and teachers, the Treasury and employers have taken some steps to tackle potential growth in costs to taxpayers. In addition to saving significant sums of money, the changes are projected to stabilise costs in the long-term around their current level as a proportion of GDP.
“However, the savings are being provided by public service employees, in the form of increased contributions or reduced future pensions. We have not seen a strategic assessment of the long term impact of these changes on the motivation and retention of staff, so we cannot say that VFM has been demonstrated.”
Amyas Morse, head of the National Audit Office, 8 December 2010

The stabilising of costs is confirmed in the published Treasury projections from now to 2030. There has been, is, and will be next to no significant cost to the tax-payer in these schemes. Its official.
It remains a bad arrangement, of course. It seems to need recalibrating every twenty-five or thirty years, on experience to date, at much expense and pain,. The tax payers (a category that includes those in the schemes, of course) underwrite the schemes, so they are at permanent unquantifiable, or badly quantified, risk (as the NAO notes in the same report). There is indeed a small residual on-going cost to the taxpayer (aka the caring employer, in this context, of teachers and nurses) in the aggregate – maybe something like 1 or 2% of total tax receipts. As said, it seems to creep up as time passes, then get chopped back. Whatever, it’s hugely much less significant a cost to the honest tax-payer than is tax avoidance and evasion.

As a fully-paid-up member-in-payment of such a scheme (Teachers) I would rather have had all the money I paid in accumulated in a pot with my name on it, well-invested at compound interest. Wasn’t really an option, in the very different world of 1958, for a young financial simpleton in his first teaching job, asked, advised, pressed to be prudent and far-sighted by signing up to the scheme. (As a matter of possible interest and relevance, a couple of years later, so prudent was I, I also signed up to an Endowment Policy, this time pressed by a bank manager – banker’s ripoff of course, as it turned out, but there you go.) What I want to tell anyone interested is this. More and more troubled by the idea that some people think my pension is money for nothing, stolen from the taxpayer, I recently gave some time and my best, most objective shot, to counting up what my 6% contributions, well-invested, would have amounted to in such an imaginary pot.

I found the answer to be staggering (to me anyway). Enough to give me an annual interest some 20% more than my pension. And of course a potential inheritance tax problem for my children that I don’t think they’d mind so much. As it is the poor suffering taxpayer has had the value of that potential pot, for what’s that been worth to him under Government trust and management. So, please get off my case. Like Othello, I have done the state some service, and I take no charity.

For anybody whose interest has been close enough to wonder if the staggering sum includes the employers contribution – no, I didn’t count that in, even though I’m told that the law holds it to be deferred wages. Hypothetically, in my dreams, add that in, and its Monte Carlo and tax havens for me. Somebody has or had the money though, and it ought to be the tax payer, but the politicians have probably lost it all somewhere along the way. Again, get off our case, will you, go be angry with the right people.

Now, back to the CPI. It’s a matter of civilised values, not fine accountant’s dialectic. A civilised society will make sure its pensioners of any sort or condition are not reduced in their honestly won circumstances by inflation erosion. The only appropriate inflation measure that so ensures is the average wage index, as used to upgrade the Old Age Pension pre-Thatcher. The RPI does not achieve it. The CPI is worse.

teacher_retired

Prof_as_was wrote: »

About some recent debate on who really pays for unfunded (sometimes called pay-as-you-go) public sector pension schemes – NHS particularly talked about here recently – and the cost to the taxpayer.

From the beginning of these schemes, the contributions were used as current year revenue, and thus reduced each year’s tax burden. For a while, the annual payouts were less than the contributions, and everybody was happy, short-term thinking prevailing as ever,. Then for a while it varied from year to year. Sometimes there was the surplus profiting the taxpayer, sometimes not, and the taxpayer lost out a bit. So the official rationale became ‘its OK, swings and roundabouts, it evens out’. I don’t know if figures exist to show how this worked out exactly over time until the 1970s. But by then, as the balance of paying in and drawing out changed, it began to look as if the tax-payers contribution, always small and hitherto balanced off, was becoming permanent. So there was a big review, renegotiation, and legislation – not to put an end to unfunded pensions, which would have been better government – but to ensure that the taxpayer didn’t permanently or significantly pay these pensions. Contributions and payouts were brought back into general balance, and again everybody lived happily for a while. But not alas ever after, because longevity etc brought the question to the fore again. By the first decade of the 21st century, it seemed that the taxpayer might again be taking a hit. Of course the tax payer doesn’t want that. What astonishingly escapes the attention of the indignant party is that the Treasury doesn’t want it, won’t have it. What happened was that there was another round of negotiated adjustments 2007-8. Maybe its memory and awareness of that moment and the discussion of it that leaves so many of the public wrongly convinced that the tax-payer bears the cost of public sector pensions. Maybe the public imagination was too incensed by the need for something to be done to notice that something was done, in good time.

So, the outcome of the 2008 negotiations?
“By making changes in 2007 and 2008 to pension schemes of NHS staff, civil servants and teachers, the Treasury and employers have taken some steps to tackle potential growth in costs to taxpayers. In addition to saving significant sums of money, the changes are projected to stabilise costs in the long-term around their current level as a proportion of GDP.
“However, the savings are being provided by public service employees, in the form of increased contributions or reduced future pensions. We have not seen a strategic assessment of the long term impact of these changes on the motivation and retention of staff, so we cannot say that VFM has been demonstrated.”
Amyas Morse, head of the National Audit Office, 8 December 2010

The stabilising of costs is confirmed in the published Treasury projections from now to 2030. There has been, is, and will be next to no significant cost to the tax-payer in these schemes. Its official.
It remains a bad arrangement, of course. It seems to need recalibrating every twenty-five or thirty years, on experience to date, at much expense and pain,. The tax payers (a category that includes those in the schemes, of course) underwrite the schemes, so they are at permanent unquantifiable, or badly quantified, risk (as the NAO notes in the same report). There is indeed a small residual on-going cost to the taxpayer (aka the caring employer, in this context, of teachers and nurses) in the aggregate – maybe something like 1 or 2% of total tax receipts. As said, it seems to creep up as time passes, then get chopped back. Whatever, it’s hugely much less significant a cost to the honest tax-payer than is tax avoidance and evasion.

As a fully-paid-up member-in-payment of such a scheme (Teachers) I would rather have had all the money I paid in accumulated in a pot with my name on it, well-invested at compound interest. Wasn’t really an option, in the very different world of 1958, for a young financial simpleton in his first teaching job, asked, advised, pressed to be prudent and far-sighted by signing up to the scheme. (As a matter of possible interest and relevance, a couple of years later, so prudent was I, I also signed up to an Endowment Policy, this time pressed by a bank manager – banker’s ripoff of course, as it turned out, but there you go.) What I want to tell anyone interested is this. More and more troubled by the idea that some people think my pension is money for nothing, stolen from the taxpayer, I recently gave some time and my best, most objective shot, to counting up what my 6% contributions, well-invested, would have amounted to in such an imaginary pot.

I found the answer to be staggering (to me anyway). Enough to give me an annual interest some 20% more than my pension. And of course a potential inheritance tax problem for my children that I don’t think they’d mind so much. As it is the poor suffering taxpayer has had the value of that potential pot, for what’s that been worth to him under Government trust and management. So, please get off my case. Like Othello, I have done the state some service, and I take no charity.

For anybody whose interest has been close enough to wonder if the staggering sum includes the employers contribution – no, I didn’t count that in, even though I’m told that the law holds it to be deferred wages. Hypothetically, in my dreams, add that in, and its Monte Carlo and tax havens for me. Somebody has or had the money though, and it ought to be the tax payer, but the politicians have probably lost it all somewhere along the way. Again, get off our case, will you, go be angry with the right people.

Now, back to the CPI. It’s a matter of civilised values, not fine accountant’s dialectic. A civilised society will make sure its pensioners of any sort or condition are not reduced in their honestly won circumstances by inflation erosion. The only appropriate inflation measure that so ensures is the average wage index, as used to upgrade the Old Age Pension pre-Thatcher. The RPI does not achieve it. The CPI is worse.

I remember many years ago our union produced figures to prove your point. I do hope this will sooth the tempers of some of our contributors though I somehow doubt they will let facts get in the way of their argument.

Interested_Taxpayer

Ripoff wrote: »

WHAT’S THE DIFFERENCE BETWEEN RPI AND CPI?

WHAT ELSE CAN I DO?
Ask your MP to sign EDM 1032, Join the protest March on 1st March in London, write to the Pensions Minister Steve Webb, use your vote wisely, support the TUC march on 26th March, and remember you will still will be being cheated at the next general election, because this change is for LIFE, as it now stands.

All. The Civil Service Pensioners' Alliance www.cspa.co.uk have now made available detail of the rally and lobby of MPs in London on Tuesday 1 March. It's on the first page of their website. Usefully, there is briefing from all the major pensioner's organisations and draft letters for you to send to your MP. These are to arrange a meeting that day or if you can't make it, asking for them to attend and support you against the move to the CPI.
This includes voting against the Social Security Benefits (Uprating) Order which applies the change to State second pensions and "pray against" the Pensions (Increase) Order applying the change to public service pensions by signing an EDM which will be tabled shortly.

Very Important.

I think we should all use this material and write now.

JamesU

Interested_Taxpayer wrote: »

This includes voting against the Social Security Benefits (Uprating) Order which applies the change to State second pensions and "pray against" the Pensions (Increase) Order applying the change to public service pensions by signing an EDM which will be tabled shortly.

As described in posts above, I found the concept of asking MPs to "pray against" the Pensions (Increase) Order pretty absurd at first glance.

But I have just found out that in parliamentary terms "praying against" means to table a motion to annul a Statutory Instrument.

So just in case anybody else finds this strange, info as above.

JamesU

Ripoff_2

Now is the time for action, go and lobby your MP on the 1st march, as many people as possible need to show that they mean business. If you can't lobby or attend the mass rally then there are things you can still do.

1) Lobby your MP on Mass www.cspa.co.uk for details
2) Visit the CSPA website www.cspa.co.uk download letter and send it to your MP
3) The NPC are organising a petition http://www.npcuk.org/ Actual petition below sign, circulate the petition and return.
4) Ask as many of your friends to do all of the above

Place the Name, Address/email and Signature along the top once you have printed out the petition heading, then get as many people as possible to sign it and return to the address shown but by no later than the 31st March 2011.

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SAVE OUR PENSIONS - RESTORE THE RPI

We the undersigned call on the Government to abandon plans to use the Consumer Price Index (CPI) as the measurement of inflation when uprating the basic and second state pensions, public sector pensions and many private sector pensions and instead restore the use of the Retail Price Index (RPI).

Name

Address/email

Signature

RETURN TO NPC WALKDEN HOUSE, 10 MELTON STREET, LONDON NW1 2EJ
NO LATER THAN 31ST MARCH 2011

---

Ripoff_2

It's still not too late to get your MP to sign EDM 1032, we have till the 17th Feb 2011. So get those letters to your MP now as a matter of urgency, (if you have not already done so), ask them politely to sign. However, check here first to make sure who has already signed http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=42021&SESSION=905.

So far 110 MP's have signed the EDM which is actually a good total for an EDM but we need as many as possible!

LAB = 88 LD = 4 CON = 0 Oth = 18

For interest another useful site to look at is www.opalliance.org.uk/ the OPA is also seeking legal advice on this issue.

See post 558 for further action you can take.

Goldwing1

Well I have received what is clearly a final letter on the matter from Damian Green which simply says;

"We will have to agree to differ on the matter."

In truth, being a minister, he was never going to sign the EDM but I'm happy he got the message.

For me things move on to attending the rally on 1st March. See you there?

Old_Slaphead

Prof_as_was wrote: »

As a fully-paid-up member-in-payment of such a scheme (Teachers) I would rather have had all the money I paid in accumulated in a pot with my name on it, well-invested at compound interest. Wasn’t really an option, in the very different world of 1958, for a young financial simpleton in his first teaching job, asked, advised, pressed to be prudent and far-sighted by signing up to the scheme. (As a matter of possible interest and relevance, a couple of years later, so prudent was I, I also signed up to an Endowment Policy, this time pressed by a bank manager – banker’s ripoff of course, as it turned out, but there you go.) What I want to tell anyone interested is this. More and more troubled by the idea that some people think my pension is money for nothing, stolen from the taxpayer, I recently gave some time and my best, most objective shot, to counting up what my 6% contributions, well-invested, would have amounted to in such an imaginary pot.

I found the answer to be staggering (to me anyway). Enough to give me an annual interest some 20% more than my pension. And of course a potential inheritance tax problem for my children that I don’t think they’d mind so much. As it is the poor suffering taxpayer has had the value of that potential pot, for what’s that been worth to him under Government trust and management. So, please get off my case. Like Othello, I have done the state some service, and I take no charity.

I'd be really, really grateful if you would publish your calcs or PM them to me to show how your 6% contributions for 40 years can equate to a fully RPI indexed pension from age of 60 and still have 20% left over

Based on current annuity rates a pension of say £17,000 (ie £25,000 salary x 40/60ths) would require a fund of approx £500,000. Over the same 40 years I would have expected Mr Average to pay about £30,000 into his scheme, assuming 6% pa, (his employers and the taxpayer will need to contribute another £120,000/£150,000 and, to balance the equation, the rest would come from investment growth).

I've done a similar exercise for the 40 years to 2008 using average wages (ie starting at £1,000pa in 1968 to £25,000pa in 2008), average inflation, an investment return of inflation +3% and arrive at a total contribution of 32% of salary to achieve required fund value.

This is not dissimilar to the findings of Price Waterhouse in 2009

http://news.bbc.co.uk/1/hi/business/8227380.stm

You use the term "well invested" - that is the Holy Grail which we all seek but thanks to the avaricious financial services sector - is illusiory (as you have found out with your Endowment). For the purposes of my calculations I've used stock market index returns less a 1% management charge which seems about the best that Joe Public could hope for (and comes out at roughly the aforementioned 3% above inflation). If you use a higher figure you are deluding yourself or you have taken the wrong career path ie you should have chosen fund management and would have been staggeringly well rewarded for such long term outperformance.


If the public sector pensions could be paid in return for a 6% employee contribution - which they can't - then why is there currently an estimated £1.2 trillion shortfall in public pensions? Even the Labour party are not denying this. Are politicians pulling a massive con trick and are the rest of us gullible to believe them ? Politicians stealing from the public sector.....now that would be a first given the money that's been firehosed at the sector since 1999!!!

Put simply, paying in 6% to a pension plan for 40 years IN NO WAY equates to taking out 67% for 25 years (and having 20% to spare)!