RPI to CPI Early Day Motion 1032

JamesU

Old_Slaphead wrote: »

Assuming, on your figures, that you get the same (ie £10,000) pension in yeear 1 - the 'loss' after 20 year is £32878 against an average pension of £16500pa ie 2 rather than 4 years pension.

Historical figures suggest your 1% figure is high - over the last 22 years the difference has been 0.69%pa - under Labour 0.95% and Conservatives 0.3%

Also, bear in mind, that this level of pension will be taxable so the actual cash loss will be less.

As you often say, nobody has a crystal ball. At present OPs would like to understand how the switch from RPI to CPI will effect them. Similarly in any awareness campaign initiated to bring this to the attention of those effected, this personal impact assessment will be required both for personal understanding and to raise and argue the issue within the public domain and in Parliament.

So it is an important figure to get right and there are two choices. One can either base the future RPI/CPI difference on speculative figures, those chosen at random or others according to self-belief.

Alternatively one can use those figures produced by the Office of Budgetary Responsibilty and the Treasury (0.75%, forecasting and Budget reports), the Independent Public Service Pensions Commission (0.75%, Lord Hutton's interim and final reports), and those cited by the Pensions minister, Steve Webb's himself in Parliament (0.8%) and his reporting on the impact analysis of CPI (0.87%).

Slaphead, I see little merit in labouring this point on RPI/CPI differences. Personal impact assessments of pension reductions due to CPI are best based on RPI/CPI figures already reported by the Government so that they cannot be disputed.

JamesU

BoxerfanUK

DavidHayton wrote: »

I'm not happy about the change from RPI to CPI, as this will cost me big money: http://www.nasuwt.org.uk/PayPensionsandConditions/England/Pensions/ChampioningPublicSectorPensions/TheChangeFromRPItoCPI/RPItoCPIReadyReckoner/NASUWT_006871
David

Using the 0.87 difference by Steve Webb;

@ 5.00% RPI - 4.13% CPI would cost me £69,084.00 over a 20 period :eek:
@ 3.00% RPI - 2.13% CPI would cost me £53,294.00 over the same period :eek:

Old_Slaphead wrote: »

Also, bear in mind, that this level of pension will be taxable so the actual cash loss will be less.

I don't think thats really gonna make anyone feel any better! U sure you're not working in Steve Webbs PR dep't? :rotfl:

JamesU

Haybob wrote: »

I notice that there may be a contractual issue with pension members buying added years, commuting lump sums to pension etc, and this is often quoted when referring to a legal challenge. However I would have thought that many more thousands actively volunteered for early retirement from many of these schemes with the same expectation of receiving RPI inflation linking. Perhaps the CPSA should be made aware of these cases as well?

Definitely. As far as I can see, there is a good case to argue here for those who purchased added years, took voluntary redundancy and/or left work for alternative employment and hold deferred pensions. In all cases it would have been on the understanding that future revaluation (pre-retirement) and indexation (on retirment) would be indexed to RPI.

There is letter here from Prospect which highlights these important issues, and other OPs may find it an interesting read also:

"The proposal presents a number of practical issues for different groups of members of public service pension schemes........

page 5 onwards in link here:

http://www.prospect.org.uk/dl/pdf/21773_3296002897.pdf/as/2010-00958-Circular:-Standard-CPI-Indexation-Version-29-06-2010.pdf

JamesU

JamesU

cvd wrote: »

I think that the point here is that the rates for these are usually decided by actuaries on a cost-neutral assumption - they do not cost the employer anything.
This means that those who chose to buy extra added years or commuted their lump sum to pension may, under certain circumstances, have been able to get a better deal on the open market if they had known that increases were only to go up with CPI. This is blatant misselling.

I would be interested in your view on the recent short thread here. The OP was attempting to purchase AVCs ahead of April on the premis that they would be indexed to RPI rather than CPI going forwards, but I doubt this will be the case, and the policy wording looked ambiguous:

https://forums.moneysavingexpert.com/discussion/comment/42025046#Comment_42025046

JamesU

JamesU

DavidHayton wrote: »

According to Robert Peston http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/02/rpi_to_cpi_costs_pension_saver.html it will cost us all £83 billion. But if it isn't saved here, what new taxes might appear, and what might be next in line for the chop? That's my worry. How's about contributions going up to 14% of salary, or the retirement age going up to 70, or a 90ths scheme, or a 100ths scheme?

Robert Peston has discussed the reductions to private sector pensions and not public sector pensions:

This is how the DWP puts it: "The main cost of this policy is to members of private sector defined benefit pension schemes who will see the anticipated value of their pension rights reduced and the value of their total remuneration package reduced in the short term." The value of this reduction in pension rights and total remuneration equates to a significant £5.7bn per annum.

And for 2m relevant active members of pension schemes, there is a reduction in their annual rate of pension accrual - which is broadly the same as a pay cut - of between £2,250 per year and £2,500 a year on average.
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/02/rpi_to_cpi_costs_pension_saver.html

If you read Steve Webb's impact assessment of CPI on pensions more carefully on page 6:

(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

An impact assessment of CPI on public sector pensions has not been reported. If there was one, we would know how much the Government is taking from public sector pension schemes.

JamesU

StevieJ

Old_Slaphead wrote: »

Most areas of society are suffering from Labour Government excesses which actively encouraged the bankers bonus bonanza in the naughties. Many 'innocent' parties will be expected to pay. I don't see why the very priviledged few who've benefited from the very best pension schemes (mostly in the public sector) shouldn't be expected to contribute too!

Right, the bodega should have opened by now......

Did he really say this - Oh Dear

6.2 In a letter dated 27 April 2010, Philip Hammond, the then Shadow Chief Secretary to the Treasury said:
"Indexation of pensions in payment is an established part of pensions legislation. The Conservative Party has no plans to change the current index-linking of public sector pensions in payment. We agree with the view that the right to indexation of pensions already accrued is part of the accrued pension rights and those rights will be protected."

JamesU

StevieJ wrote: »

6.2 In a letter dated 27 April 2010, Philip Hammond, the then Shadow Chief Secretary to the Treasury said: "Indexation of pensions in payment is an established part of pensions legislation. The Conservative Party has no plans to change the current index-linking of public sector pensions in payment. We agree with the view that the right to indexation of pensions already accrued is part of the accrued pension rights and those rights will be protected.

Steve Webb says no.

JamesU


Parliamentary debate and vote on switch to CPI (via Uprating order, 17th Feb 2011, part of debate in Sections 1208-1209)
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/chan121.pdf

The OP StevieJ (right hon Gentleman) raised the important issue of accrued rights. It is a fundamental point and it relates to my pre-election remarks about a pension promise made being a pension promise kept. What is the accrued right of someone in a public sector pension scheme, or any pension scheme? The first point is that everything accrued to date—all the revaluations to date, based on RPI—stand; we are not going back and saying that all the revaluations to date have to be reworked according to CPI. The provision is prospective, not retrospective. The question then is what future expectation people legitimately have. If they are in a company scheme that has RPI in the rules, we actively chose not to override that. If that was their expectation, because it was in the rules, that is what they will get. However, people in the public sector are members of a scheme whose rules are tied by statute to what we do to SERPS. That is the accrued right they have always had, and we are not changing it. We shall go on indexing their pensions in line with what we do to SERPS each year. That was the pension promise they were made; that is the pension promise we are keeping. We are indexing SERPS by CPI. I accept that, and I also accept that on average that will be lower than RPI, typically by about 0.8% a year. I do not dispute that. The accrued right is the one we are honouring. :laugh:


Steve Webb (right Hon)

BoxerfanUK

I think the argument needs to focus NOT on what politicians have said in the past, as we all know that they play around with words to suit themselves and wriggle out of promises at ANY opportunity.

The focus needs to be on the fact that they are going to cause pensions in the future to lose their value relative to the actual real cost of living. A fact borne out by the RSS, whom, as has been mentioned a number of times already, have stated that CPI is NOT a suitable method of calculating pension increases.

ordinaryman

This is sheer nonsense! For Webb to say that for Private Sector Pensions he will not actively seek to override the rules which tie pension increases to the RPI, yet for Public Sector Pensions, because we are tied by statute to SERPS, ours will be uprated by the CPI and that this protects us against inflation is totally morally reprehensible. It is a betrayal of the work and efforts of thousands if not millions of former Public Sector Employees who were informed and believed in all good faith that their pension benefits would be honoured in full.

For 37 years out of 38 ( 2010 being the exception because of negative inflation) Public Sector Pensions and Benefits have risen according to RPI. What is more, in most literature accompanying the award of a public sector pension RPI is specifically and unambiguously stated to be the measure of uprating. Ergo public sector pensioners believed, expected and planned, de facto, their financial affairs on the basis of these statements. We therefore must hold the Coalition Government to this contract.

I urge all Unions, Associations and Pensioner Groups to now engage a top flight legal team to fight an enormous class action on this issue all the way to the International Court of Human Rights.

For CPI to have been substituted for RPI represents possibly the biggest breach of contract, retrospectively enabled expropriation and affront to natural justice that this country, supposedly under the rule of law, has suffered for hundreds of years. It is the act of an unprincipled government engaging in the lowest form of skulduggery and a transparent legal action will expose the measure for what it is, theft of Accrued Rights by a deceitful Government.

We must not allow the Coalition Government to get away with this, for rest assured, if they do, they will mount further attacks on our pensions and come after us again!

StevieJ

JamesU wrote: »

Steve Webb says no.

JamesU



Steve Webb (right Hon)

Do you actually think all that blurb actually trumps this?

The Conservative Party has no plans to change the current index-linking of public sector pensions in payment