RPI to CPI Early Day Motion 1032

JamesU

Ripoff wrote: »

Already available SEE Post 709
http://home.btconnect.com/AP_Publications/effectscalc/ or download calc from here.

Ripoff, fantastic effort, really mean it. I know how much effort has gone into this because I prepare similar for forecasting and trading purposes.

But with all due respect, I do not think this is very effective for the average user. The emphasis is on loss of £X over Y years, and I read similar on civil service links. Not very user friendly, informative or understandable by person involved or for justification purposes.

If I showed the spreadsheet to my elderly relatives, friends in employment with ongoing/deferred pensions or retired neighbours, they would scratch their heads and show me the front door. Similarly, I doubt many on MSE would feel confident with the Excel spreadsheet. Again I mean no disrespect, just being objective here.

If you want a large response from the public it would need to be something far more simplistic, with no need to download, and easily completed online like this one:

http://www.h-l.co.uk/news/inflation-calculator

And with input and output something like below for example:

Q: My current pension is INPUT
Q: My age is INPUT

A: Your current pension is XX

A: In 10 years time the reduction in your pension is X%. In other words in today's terms, instead of receiving £X you would receive £Y.

A: In 20 years time the reduction in your pension is X%. In other words in today's terms, instead of receiving £X you would receive £Y.

A: In 30 years time the reduction in your pension is X%. In other words in today's terms, instead of receiving £X you would receive £Y.

Would you like to print this page? YES?NO

Footnotes on printing:
RPI/CPI differential (refs to whoever)
Average % used (refs to whoever)
Note: these are modest forecasts as differential could be blah blah

Similar could be set up for deferred pensions.

Pension forecast for switch from RPI to CPI then complete,
PRINT
Either post with questions or see an MP and ask for their justification.

JamesU

MEY_3

Look at it this way. If you said to your pensioner friends give me 1.1% of your pension rise this year and between 1 and 2% every year until your demise I am sure they'd understand it quite clearly and say no. Then tell them that is what the government are in effect doing - taking that rise for themselves. Surely that is pretty clear!

JamesU

MEY wrote: »

Look at it this way. If you said to your pensioner friends give me 1.1% of your pension rise this year and between 1 and 2% every year until your demise I am sure they'd understand it quite clearly and say no. Then tell them that is what the government are in effect doing - taking that rise for themselves. Surely that is pretty clear!

I have looked at it that way. It is "only" a marginal/small change from RPI to CPI isn't it? 1% on a £10-15K income (state pension + whatever else) is around £100-150/yr. Not a huge sacrifice given the mess the country is in. And the Government does provide a heating allowance of £200 each year to compensate for that, so what is all the fuss about? Obviously just an example reply here.

For a lot of people, the longer term impact of the compounding effects due to this "small" change on pensions is not that easy to quantify and discuss. So how best get the message across to a wider audience, and how can they then argue that a switch from RPI to CPI is indeed going to have a serious impact?

If you have an "impact assessment/analysis" on a sheet of paper with calculated figures showing that in e.g. 20 years time your pension will be eroded to the extent there will be approx 20% less to spend each week in today's terms, I think that has meaning and provides a more convincing case against the use of CPI as an inflation measure. But it was just a suggestion.

JamesU

MEY_3

I wasn't meaning to be critical or facetious JamesU. Yes, the effects are compounded and that is significant but sometimes a simple framework can help set the mind thinking for people who shrink from figures and calculations.
The mess the country is in is not relevant because this is intended to be an permanent change, and any heating allowance is neither guaranteed to be permananent nor remain at current levels or above, so folk shouldn't try to offset things in their minds like that. Receiving RPI was a reasonable assumption, whereas no one can think government allowances (policies) are assured in perpetuity.
Let me be clear. I'm not arguing against using any calculator but trying to suggest the simplest way to try to get the message across to people so they can quickly appreciate that they are losing an amount that is significant over the course of their retirement.

Haybob

It is indeed difficult, someone aged 60 losing 1% just shrugs their shoulders but if when aged 80 were told that they were to loose 20% would complain bitterly. That is why there has been so little protest. The government have taken advantage of the fact that most people just live for the day; at least the Ford Workers have been prompted and rallied by their local Unite representatives to understand that this steal is worth fighting.

Ripoff_2

JamesU, thanks for the comments about the calculator and I do appreciate your insight as to it's suitability for the lay person. I agree many may find it daunting but to be honest it was never designed for a lay person to use. It was designed to show the true compounding effect of this change so that people using it (who use Excel) could see instantly what that really did mean. I put it together quickly to get the message out in a better form than there was at the time and hoped this would help others see the argument better. I also did publish a full set of comparison figures in this forum at various income levels so that it was easier for people to understand. In the hope that the impact and argument being put forward became more of a reality to them when they saw the money lost over time.

The chart supplied along with the figures was the easiest way of showing that.

The chart shows clearly that if you leave the variance at the average of 0.75% and assume 3% inflation over the 30 years, apart from this year 2011, which is already set at the actual variance i.e 1.5%. By simply putting in the persons gross pension and referring to the chart you can read off for any period what the loss will be in £’s over time and it does clearly show how the loss is exponential inn a pictorial view. Perhaps using it this way and showing people their personal chart would be more effective, but I do agree it is not a perfect tool for the general public.

Regarding putting on the web to be used via the web is a good idea and I think would be useful however that is beyond my ability I'm afraid. If anyone reading this is able to take up the idea suggested by JamesU then please feel free to do as he suggests and advise us all on the forum of the web address.

Thanks again

Ripoff

Calculator for anyone reading this can be downloaded at http://home.btconnect.com/AP_Publications/effectscalc/

Ripoff_2

Haybob wrote: »

It is indeed difficult, someone aged 60 losing 1% just shrugs their shoulders but if when aged 80 were told that they were to loose 20% would complain bitterly. That is why there has been so little protest. The government have taken advantage of the fact that most people just live for the day; at least the Ford Workers have been prompted and rallied by their local Unite representatives to understand that this steal is worth fighting.

Haybob, I had a Twitter Tweet from a Doctor today that said "I am a pensioner and will lose a bit with CPI. But grateful for a better public sector pension than many can get."

So it appears he believes he is "Doing his Bit" so to speak but has failed to realise that though he may be able to absorb the loss, there are many pensioners that can not afford any reduction in income.

They are already on the poverty line be they Private or Public sector especially those not drawing their state pension yet.
He hasn't taken into account that this change affects not only the richer pensioners but also the poorest. He has forgotten about the lower paid public sector pensioner or the many lower paid private sector pensioners who will also be hit by this change.

This is the problem, we have a set of the community that are willing to take the hit but don't seem to realise that this change is affecting ALL levels not just the better off pensioner. They are deluded into believing the Government line that "We are all in this together" but fail to realise that a loss of this magnitude for the lower income pensioner is fair more of a hit then the better off pensioner in real terms. I.e the richer can afford to take a hit maybe but the poorer can not.

Hence, why we ALL need to get the message out there that this change is WRONG and needs to be put RIGHT before more and more people slip slowly into poverty in their old age.

Old_Slaphead

I went out with a few friends last night who are public sector (NHS & LG) and brought up the topic of RPI/CPI.

The concensus was that they were far more worried about
(a) what's going to happen to their jobs
(b) what's going to happen to their pension schemes
than whether they'll be losing 10% of their pension in around 30 years time.

Interested_Taxpayer

Old_Slaphead wrote: »

I went out with a few friends last night who are public sector (NHS & LG) and brought up the topic of RPI/CPI.

The concensus was that they were far more worried about
(a) what's going to happen to their jobs
(b) what's going to happen to their pension schemes
than whether they'll be losing 10% of their pension in around 30 years time.

Amazing what a few glasses of sherry and someone who can't or won't tell the correct story will do.

JamesU

Old_Slaphead wrote: »

I went out with a few friends last night who are public sector (NHS & LG) and brought up the topic of RPI/CPI. The concensus was that they were far more worried about
(a) what's going to happen to their jobs
(b) what's going to happen to their pension schemes
than whether they'll be losing 10% of their pension in around 30 years time.

I can understand this for sure. There are a lot of people seriously concerned about work and financial security in the public sector right now, for obvious reasons. Faced with this, what is going to happen in 10-30 years time becomes less of a priority in people's minds. But that still does not make it right to allow the Government to degrade the value of people's pensions.

OldSlaphead, you made an error in your estimations though. Irrespective of their age or when they retire, the value of your friends' current pensions will decrease in real terms by a minimum of 26% in 30 years time (and not 10%) due to the switch from RPI to CPI. We went through those calculations here:

http://forums.moneysavingexpert.com/showpost.php?p=39231214&postcount=128

JamesU