RPI to CPI Early Day Motion 1032

hugheskevi

(a) Public: switch from RPI to CPI by default overide of social security uprating order (as in your post #114). Then irrespective of public sector scheme rules (e.g. PCSPS referring to RPI, as in posts #147/148) the indexation and revaluation will be according to CPI in future, with no practical legal recourse possible.

I don't think override is the correct word to use here. The indexation applied is the rate of the increase in prices over the previous year in the opinion of the Secretary of State (of the Dept. for Work and Pensions).

Hence, nothing is being over-ridden, it is just that, in the opinion of the Secretary of State, the CPI is a better measure of change in prices than RPI.

I am not sure about the claim that public sector scheme rules refer to RPI, and it does not accord with all of my understanding. Certainly there are mentions of RPI in the 1972 section, but they do not seem to be in relation to the main pension - there are many more mentions of the Pension (Increase) Act 1971 which do seem to refer to main pension.

However, I am not a lawyer and would happily stand corrected on this point. In any event, I'd appreciate a reference as to the text people would rely on to demonstate that the main schem pension was linked to RPI.

(c) Private: RPI to CPI switch dependent of scheme rules, but the Government has not gone as far as to provide a statutory overide for the private sector (link 1 below) but the employer may still be able to switch to CPI anyway as "listed changes" after a 60 day consultation period (link 2 below, first paragraph, p2).

Correct, but worth adding that such a change would only be in relation to future service.

If my understanding above is correct, not sure what legal challenges can be brought by individuals in different sectors.

As I see it (and emphasing again I do not have a legal background), they would fall into the following categories:

1. Secretary of State is being irrational choosing CPI as measure of change in prices
   
2. Legitimate expectations
   
3. Deprivation of property rights (an ECHR-type argument)
   

Whilst there are arguments for and against CPI being the best measure of the change in prices, it is unlikely that anyone could make a case that CPI is an irrational choice of price change.

The argument of legitimate expectations would probably centre around scheme literature commonly citing RPI. However, there are clear precedents that scheme rules trump scheme literature.

To demonstrate that property rights have been violated, you would have to show that the rights existed in the first place. Hence I think this and the legitimate expectations point above would be inter-linked.

For private sector schemes moved onto CPI as a consequence of the change to the revaluation order, it would be interesting to see who a legal case on grounds of legitimate expectation would be brought against. Presumably it would be the scheme itself, as the Government is free to set out what the minimum revaluation is, and it is for schemes to obey the rules. Hence it is hard to see how you would challenge anyone other than the scheme itself in this case. I think the same applies for pension schemes such as BT's where they link to legislation.

JamesU

hugheskevi wrote: »

I don't think override is the correct word to use here.
For private sector schemes moved onto CPI as a consequence of the change to the revaluation order, it would be interesting to see who a legal case on grounds of legitimate expectation would be brought against. Presumably it would be the scheme itself, as the Government is free to set out what the minimum revaluation is, and it is for schemes to obey the rules. Hence it is hard to see how you would challenge anyone other than the scheme itself in this case. I think the same applies for pension schemes such as BT's where they link to legislation.

My description of overide was loose and inaccurate, better said as: the view of the Secretary of State overides any other opinion.

The PCSPS scheme documents are in the link below under the bolded PCSPS title as red links. Might be important as other pensions seem to be related to this one as "by analogy" schemes.

My legal understanding is quite limited, but I have not seen any strong or compelling legal arguments to deter a switch from RPI to CPI. The main issues seem to surround the known and quantifiable detriment to people's pensions across the sectors, and the individuals' limited opportunity to argue their case. But these two points would seem to provide sufficient justification to canvass local MPs for support in relation to the EDM. Time will tell.

On the issue of any challenge to scheme providers, I have no idea how that would shape up. Similarly, would retired and deferred members have a stronger case than actively employed members. In the former case, their is no choice in the matter whereas in the latter case an employee has the option to accept the terms or move on.

I do find the articles posted earlier on private sector legislative issues quite disturbing. It seems that mechanisms to renege on RPI within private sector pensions are also being put in place.

http://www.civilservice.gov.uk/my-civil-service/pensions/governance-and-rules/scheme-rules.aspx


JamesU

hugheskevi

I do find the articles posted earlier on private sector legislative issues quite disturbing. It seems that mechanisms to renege on RPI within private sector pensions are also being put in place.

I don't think this is the case. In the December consultation the Government states:

Statutory Override
The Government does not propose to introduce legislation that would directly override the rules of occupational pension schemes without the consent of trustees or employers. The Government believes this would:

(a) represent an unwarranted interference in the rights of employers and trustees to manage their financial affairs. It would potentially override arrangements agreed through collective bargaining arrangements, privatisation agreements and private contracts;

(b) create unnecessary complications and difficulties in respect of employment and other contracts; and

(c) potentially have a detrimental impact on members in schemes where the employer is prepared to fund increases at a rate above the required statutory minimum.

The Government has no plans to interfere with existing contracts for buy-outs or buy-ins by means of a statutory override and no plans to interfere with existing annuity contracts.

That is quite definitive - future accruals could of course change (after consultation) but equally employers could close the scheme after consultation, so that isn't much of a change.

JamesU

hugheskevi wrote: »

I don't think this is the case. In the December consultation the Government states:
That is quite definitive - future accruals could of course change (after consultation) but equally employers could close the scheme after consultation, so that isn't much of a change.

Yes, understood, I reached the same conclusion when the Dec consultation was published:

http://forums.moneysavingexpert.com/showpost.php?p=39201826&postcount=113

I was referring to the following from link below:

Consultation & consent: If scheme trustees or employers do want to change RPI to CPI for future service, the question arises of whether the consultation requirements apply. Our view is that they would not apply, as such a move is not covered specifically by any of the listed changes. When trustees/employers adopted the reduced revaluation cap of 2.5% last year, the Pensions Regulator did not see consultation as necessary. A similar approach might be expected with a move from RPI to CPI.Trustee consent may be needed to modify future service pensions, but it should be rare for trustees to withhold consent, especially in the current financial climate, where employers want to reduce the cost of future benefits.

http://www.bluefingroup.co.uk/docs/Update%20-%20Inflation-proofing%20and%20occupational%20pensions%20%28130710%29.pdf

If this approach is adopted, presumably it will effect deferred members increases in pension prior to retirment also. So a retrospective change for private aswell as public sector employees.

Edit: think I can answer, later article has new proposed legislation:

NEW REQUIREMENT TO CONSULT: The DWP intends to amend the Consultation by Employers Regulations so that any proposal to amend a scheme’s rules about the rate at which pensions in payment are increased or deferred benefits are revalued will become a ‘listed change’, if the new rate is ‘less generous’. As a consequence, employers will be obliged to enter into a consultation exercise lasting at least sixty days before such a variation could be made.

http://www.hymans.co.uk/knowledgecentre/Documents/60%20Second%20Summaries/1012%20CPI%2060SNS.pdf

Guess it depends if there is a requirement for agreement between employer/employee during the 60 day consultation or whether it is just a formality for the employer to inform the employee of any switch to CPI.

JamesU

hugheskevi

A little off-thread perhaps, but hopefully people found that exchange informative, if perhaps a little technical.

Just to remind folks of the main point of the thread, Early Day Motion 1032:

Early Day Motion

EDM 1032
INDEXATION OF PENSIONS AND BENEFITS
17.11.2010

Robertson, John That this House notes the Government's proposal to use the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) for the price indexation of benefits, tax credits and public service pensions; further notes that the CPI is consistently lower than the RPI; expresses concern over the impact that this will have on the incomes of pensioners and other vulnerable groups; recognises the concerns held by the Royal Statistical Society and the UK Statistics Authority that CPI excludes many housing costs which are borne by the majority of pensioner households; and calls on the Government to take these concerns into account and postpone the change from RPI to CPI until the appropriateness of CPI as a measure of price increases borne by pensioner households can be fully evaluated.

MEY_3

JamesU - Quote: "On the issue of any challenge to scheme providers, I have no idea how that would shape up. Similarly, would retired and deferred members have a stronger case than actively employed members. In the former case, their is no choice in the matter whereas in the latter case an employee has the option to accept the terms or move on."

Seems to me that there is a fundamental weakness in the whole mechanism. Current employees may have an input via their union representatives as to negotiations over pension scheme amendments. Current scheme members though had already accepted a particular set of terms? Why should those change except with the express consent of those affected? And where does that leave current pensioners who have no say in future (retroactive) changes, and no recognised body to defend their position? Beware, all you people in affected pension schemes. You need not only to think of any changes that are made now by the employer, government, trustees and unions but how you protect your interests once retired. Though unions may assist their prime responsibility is to their paying members.

Ripoff_2

Slowly but surely the MP's that have signed the EDM is still increasing, So far 111 MP's have signed.

LAB = 89 LD = 4 CON = 0 Oth = 18

Another date for your diary is the 17th Feb, that's when the Statutory uprating order goes before Parliament. This will set this years indexing at 3.1% CPI so from then on the fight is on for next year, this assumes it gets through Parliament.

So this year MOST Public and Private pensioners will lose 1.5% indexing increase i.e 4.6% RPI - 3.1% CPI = 1.5%, therefore if we assume this continues next year and we can't get this changed, then the 1.5% loss is compounded on to next year and if CPI is adopted you know that you will at least have less of an increase next year by 04%. to 0.86% but it could be more, again this is compounded by the initial 1.5% plus another approx 1% for next year and so it goes on and on. Hence why this change is so distructive to many pensioner incomes and hence why it is so important to keep up this fight no matter what happens on the 17th Feb.

This fight will not be over then, in fact it will just be beginning to get this policy changed for next year. Don't forget many of you have a vote in the local elections in May, used wisely, it could send a very powerful message to the Tories and LD's. MP's are always fearful of the loss of their seat and you could use the vote in May to remind them of that?

But first there is the rally and lobby of MP's on the 1st March and then on the 26th March the TUC march and rally both in London

Ripoff_2

All, you may be interested in how the £83bn robbery is actually calculated and how it is being stolen from Private Pensioners and given back to the employers and shareholders. Some people on this forum have expressed doubts that this is actually the consequence of the switch from RPI to CPI, and said we were issuing propaganda, so don't take my word for it, look at the link below and see how the Government are aiding and abetting this theft! Look who signed the order.....Mr Steve Webb LD the pensions Minister

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

I also know some on this forum have questioned whether the actual loss is a real loss or just perceived, but you can see from this document exactly how much that loss will be, it proves what the people on this forum have been saying from the beginning.......Hence why the EDM and getting MP's to think again is so important.......this Tory led Government, as if we really had any doubts are stealing from private pensioners and giving their friends in the city, a BIG bonus at our expense.........This is obscene, disgraceful, theft and a betrayal of us all.

Haybob

Stuff the workers, support the share holders, same old Tories.
This says it all really http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/02/rpi_to_cpi_costs_pension_saver.html?postId=106306651

teacher_retired

The previous threads have pointed out quite rightly that the basic legislation does not stipulate a particular inflation index. It is upon this that the current 'non-negotiable' stance is being taken.
This was because the rpi was the only index and it was assumed by all parties that this was the index which would be used.
However since 1971 all pension agencies have annually upon request sent members their contract which stipulates withour reservation that this is the index which will be used.
These have become accrued rights for those who have bought into those years. The removal of these rights is what I assume will be the basis for a challenge.
As for the future it is worth remembering that the original 1971 legislation came from discussions with the various parties concerned it was not dictated. Any change to future years payments should be arrived at following discussion and hopefully aggreement with the interested parties.
If people are excluded from any form of negotiation/ discussion about their futures it does not surely require much imagination to perceive there may be a little disquiet around the place.
The government has said it wants to talk and if possible reach aggreement with the unions etc. Lets hope it does because the whole range of public and many private sector workers know now about this change and its consequences.
I think this thread has been very successful in playing a major part in raising awareness amongst all these groups and many people also support EDM 1032 because of it. Well done everyone - even those against this for you too have helped bring the realisation of the threat facing them to a large sector of the public. Thank you.
We don't yet know the outcome of this controversy but I feel much relieved that people now know whats going on.
Retired people like myself have very little influence but I do know many of those in work are preparing themselves for a long and difficult jouney and I'm sure many retired people will join me in wishing them well.
With the change going through parliament on February 17th it is now that the debate truly begins.