CPI/RPI Consultation

RichandJ

Document is out here :

http://www.dwp.gov.uk/consultations/2010/cpi-private-pens-consultation.shtml

for those interested. Page 13 says there'll be no statutory override to force CPI on Trustees.

Ripoff_2

What about Expublic sector pensioners like BT?

RichandJ

Ripoff wrote: »

What about Expublic sector pensioners like BT?

I think, although I stand to be corrected if necessary, that this consultation is for pure private sector schemes, i.e. those which were not formerly part of the public sector. Hence why I started a new thread rather than adding to your Early Day Motion one or the Ask the Pensions Minister one. It was just a heads up to those in the pensions industry.

As far as I can see from the EDM thread the BT scheme and possibly others like it will have to abide by the Trust Deed & Rules of the Scheme.

[Semi rant]

I don't want to get into this too deeply, but TD&R always override either booklets or individual letters to members. The latter, don't forget, may have been drafted by poorly paid, untrained, unmotivated administrators and may or may not have been checked by a slightly less poorly paid, semi-trained, slightly more senior administrator.

Administration, that is the calculation of benefits & communication thereof to members, has always been the poor relation in pensions departments or third party pension administrators - badly paid, undermanned and often left to just 'get on with it' by the better remunerated consultancy and actuarial functions.

Please remember that when you next have problems with your scheme administrator - you're asking questions of people who may not know or have been told the answers.

[Semi rant over]

Haybob

How right you are RichardJ, but who takes the responsibility of infactual information?
My wife thought that it would be a 'good idea' to pay on top of her 6% contributions a further 9% of her money to buy added years in a Local Government Scheme, she was told after several queries that these added years would attract index linking at RPI rates, no suggestion that some robber from a government could destroy it.

I believe the pension changes to CPI will be this Government's 10p tax hike problem, its all very unfair and messy.

RichandJ

Haybob wrote: »

How right you are RichardJ, but who takes the responsibility of infactual information?
My wife thought that it would be a 'good idea' to pay on top of her 6% contributions a further 9% of her money to buy added years in a Local Government Scheme, she was told after several queries that these added years would attract index linking at RPI rates, no suggestion that some robber from a government could destroy it.

I believe the pension changes to CPI will be this Government's 10p tax hike problem, its all very unfair and messy.

That's the problem though, I've been doing this job for more years than I care to remember, and just when you think you're getting the hang of it the politicians (all flavours) come along and change things. When your wife was told that it would probably have been in good faith but there is always political risk.

Ripoff_2

Be aware, be very aware!!

Would you trust this Government?

The document sets out some background and considers options to introduce statutory override legislation to allow Trustees or scheme sponsoring companies to move to the CPI if RPI is written in the Scheme Trust Deeds and Rules. There is also consideration of whether or not to introduce Modification Powers for those schemes where the Deeds and Rules cannot be changed.

On first reading the proposals are good for pensioners, but then on further reading the message is mixed. On both of the issues above the document states, in bold, that the Government does not propose to introduce legislation, but then goes on to ask the question on whether or not there is any justification for introducing it.

So does "not" mean "well maybe"?

As it stands this leaves BT pensioners and the like in limb! Legal challenge I fear will be required? Could end up costing the Government more in legal fees defending this policy as they don't save on BT and the like because they do not pay their pensions, the ex company schemes do, this has nothing to do with saving money because of the national debt.

I am sure there are enough BT and others out there to get together and contribute to a good legal team to fight this.

Ripoff_2

RichandJ wrote: »

I think, although I stand to be corrected if necessary, that this consultation is for pure private sector schemes, i.e. those which were not formerly part of the public sector. Hence why I started a new thread rather than adding to your Early Day Motion one or the Ask the Pensions Minister one. It was just a heads up to those in the pensions industry.

As far as I can see from the EDM thread the BT scheme and possibly others like it will have to abide by the Trust Deed & Rules of the Scheme.

[Semi rant]

I don't want to get into this too deeply, but TD&R always override either booklets or individual letters to members. The latter, don't forget, may have been drafted by poorly paid, untrained, unmotivated administrators and may or may not have been checked by a slightly less poorly paid, semi-trained, slightly more senior administrator.

Administration, that is the calculation of benefits & communication thereof to members, has always been the poor relation in pensions departments or third party pension administrators - badly paid, undermanned and often left to just 'get on with it' by the better remunerated consultancy and actuarial functions.

Please remember that when you next have problems with your scheme administrator - you're asking questions of people who may not know or have been told the answers.

[Semi rant over]

Perhaps you could advise here please.
(This may only apply after April 2009).

In April 2009 the BT pension scheme was changed to a Career average scheme, increase in age from 60 to 65 and increased contributions. This change was voted on by the employees in 2008 and the change accepted on the understanding that this measure would secure the scheme for the future. Embedded in the pension review agreement was additional benefits and this one was as follows:

Option 1 (Section B members pension only)
Section B members can move to Section C terms for future service benefits and pay Section C contribution levels.
The pension and lump sum will be calculated in the same way and on the same formula for service from 1 April 2009.



However, there are several differences including, for example, the level of guaranteed increases after retirement:

• Section B pensions are guaranteed to increase each year in line with Retail Prices Index (RPI)
• Section C pensions have similar increases but are capped at 5% each year.

This option will be available with effect from 1 April 2009 and yearly afterwards.
Option 2 etc goes on about Section C members.


As you can see this was a Guaranteed increase by RPI for section B members (the Majority) and further the following was also added "BT is liasing with the BTPS Trustees to amend the Rules so that the changes, as proposed during the consultation period, are effective from 1 April 2009".


Am I correct in thinking that this is a solid RPI increase irrespective of the original trust deeds as they were to be amended, so they said? Therefore from 2009 onwards existing employees and pensioners should get guaranteed RPI increases. I would have thought if BT reverts to CPI now for these people then there is enough here for a legal challenge?

All this is from the final pension review document and was provided by BT as the new terms and conditions from April 2009 onwards.

Any advice on this would be most welcome.

chris_m

That document has a footnote stating that it is only a summary of the arrangements and that the definitive is the scheme rules - it also says that if there is any discrepancy between the two wordings, those in the scheme rules are the definitive.

I only have the Section C rules (not being in any other I've had no need to get hold of them) as at March 20th 2009, but these refer to "the General (All Items) Index of Retail Prices" which I assume is what has become generally known as RPI. However they go on to say that "or if this ceases to be published or becomes inappropriate, such other measure as the Principle Company, in consultation with the Trustees, decides."
I guess the issue is on whether BT & the Trustees can deem RPI to have become "inappropriate" - that is what I think they are currently seeking legal guidance on.


The rules document is available at http://www.btpensions.net/btps/booklets/booklets_and_scheme_rules.htm however, the page does state that it's only applicable for benefits accrued up to 31/03/2009 and the Rules are still being updated for benefits built up after that date.

JamesU

Haybob wrote: »

How right you are RichardJ, but who takes the responsibility of infactual information?
My wife thought that it would be a 'good idea' to pay on top of her 6% contributions a further 9% of her money to buy added years in a Local Government Scheme, she was told after several queries that these added years would attract index linking at RPI rates, no suggestion that some robber from a government could destroy it.
I believe the pension changes to CPI will be this Government's 10p tax hike problem, its all very unfair and messy.

The Civil Service has legal concerns regarding a switch from RPI to CPI for members who made AVCs. See pages 5-6 for discussion on this.

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

JamesU

Ripoff_2

chris_m wrote: »

That document has a footnote stating that it is only a summary of the arrangements and that the definitive is the scheme rules - it also says that if there is any discrepancy between the two wordings, those in the scheme rules are the definitive.

I only have the Section C rules (not being in any other I've had no need to get hold of them) as at March 20th 2009, but these refer to "the General (All Items) Index of Retail Prices" which I assume is what has become generally known as RPI. However they go on to say that "or if this ceases to be published or becomes inappropriate, such other measure as the Principle Company, in consultation with the Trustees, decides."
I guess the issue is on whether BT & the Trustees can deem RPI to have become "inappropriate" - that is what I think they are currently seeking legal guidance on.


The rules document is available at http://www.btpensions.net/btps/booklets/booklets_and_scheme_rules.htm however, the page does state that it's only applicable for benefits accrued up to 31/03/2009 and the Rules are still being updated for benefits built up after that date.

Thanks, however, this was the change from the 1st April 2009 it says they are changing the rules to impliment these changes and additional benefits therefore this will have been done otherwise people voted on a LIE. People were told this was a legally binding agreement and therefore this would be breach of contract wouldn't it? Section B is different and this only applies to that.

chris_m

I've had a look on the internal HR Pensions website in case it's only the Hermes one that's not up to date but no joy, only the same rules document is available.