R.P.I. to C.P.I. am I right in thinking....

mamabuddah

that even as an existing pensioner (not too financially savvy I may add) my company has decided to go the C.P.I. route, I will innevitably suffer as even existing pensioners like me will now have the "new" rate applied....I honestly thought that being in receipt of my pension already my rights/terms were somehow protected and this change would only effect those on deferred pensions or those yet to reach pensionable age....oh well may have to start looking for another job....

DavidHayton

mamabuddah wrote: »

that even as an existing pensioner (not too financially savvy I may add) my company has decided to go the C.P.I. route, I will innevitably suffer as even existing pensioners like me will now have the "new" rate applied....I honestly thought that being in receipt of my pension already my rights/terms were somehow protected and this change would only effect those on deferred pensions or those yet to reach pensionable age....oh well may have to start looking for another job....

Yes, if your company has decided to switch from RPI to CPI, you will be affected by this. On average you will be about 0.8% worse off each year ... and the difference will compound year on year.

David

JamesU

mamabuddah wrote: »

that even as an existing pensioner (not too financially savvy I may add) my company has decided to go the C.P.I. route, I will innevitably suffer as even existing pensioners like me will now have the "new" rate applied....I honestly thought that being in receipt of my pension already my rights/terms were somehow protected and this change would only effect those on deferred pensions or those yet to reach pensionable age....oh well may have to start looking for another job....

The Government achieved this as summarised in the post here:

http://forums.moneysavingexpert.com/showpost.php?p=42149098&postcount=888

If you want to understand how the switch from CPI to RPI will reduce you pension in the future, read e.g. here (link to calculator in first, reduction in pension in others):

http://forums.moneysavingexpert.com/showpost.php?p=42108708&postcount=876
http://forums.moneysavingexpert.com/showpost.php?p=42120526&postcount=883
http://forums.moneysavingexpert.com/showpost.php?p=41904364&postcount=84

If you want to do something about this, there are a number of EDMs proposed which you can support, just have a look at the last few pages in the main thread here:

https://forums.moneysavingexpert.com/discussion/2881124

JamesU

hugheskevi

my company has decided to go the C.P.I. route

It sounds like you lose out, but you should be certain about what precisely this means in your company's case.

In the following, revaluation means how the pension is uprated between the time someone stops accruing pension and the time when the pension comes into payment. Indexation refers to how the pension increases once in payment. The options are:

a) Both revaluation and indexation moved to CPI basis (often former public sector employers)
b) Revaluation moved to CPI basis, indexation remains RPI basis (probably the most common change in the private sector)
c) Indexation moved to CPI basis, revaluation remains on RPI basis (very unlikely)
d) Both revaluation and indexation remain on RPI basis, new accruals of pension moved either partially or fully to CPI basis.

In cases (a) and (c) you lose, in (b) and (d) you are unaffected.

You might also want to check if the indexation you receive is capped above a certain level - with RPI and CPI not far off 5% the caps might soon be biting.

Debt_Free_Chick

mamabuddah wrote: »

that even as an existing pensioner (not too financially savvy I may add) my company has decided to go the C.P.I. route, I will innevitably suffer as even existing pensioners like me will now have the "new" rate applied....I honestly thought that being in receipt of my pension already my rights/terms were somehow protected and this change would only effect those on deferred pensions or those yet to reach pensionable age....oh well may have to start looking for another job....

It depends on the precise wording of the pension increase in the rules of the scheme.

You could ask for that rule and post it up here

The_Economist

Debt_Free_Chick wrote: »

It depends on the precise wording of the pension increase in the rules of the scheme.

You could ask for that rule and post it up here

This is where it gets confusing. As i understand it if its writtern in black and white in your terms and conditions of your policy it carn't be changed but if its down to the discretion of the company that runs the pension then you are at there mercy. If its a final salary pension then it will be in the companys interest to go CPI on payment rather than RPI as the company will save millions going to CPI. So CPI means you lose.

Shimrod

The_Economist wrote: »

This is where it gets confusing. As i understand it if its writtern in black and white in your terms and conditions of your policy it carn't be changed but if its down to the discretion of the company that runs the pension then you are at there mercy. If its a final salary pension then it will be in the companys interest to go CPI on payment rather than RPI as the company will save millions going to CPI. So CPI means you lose.

But the company doesn't run the pension - it is run by trustees. Some of the trustees will be company nominated and some (if the pension members show any interest) will be nominated by the active, deferred and pensioners themselves. The trustee has to act in the best interests of the pensioners, and cannot (should not) make decisions that will be to the detriment of the pension scheme members.

Many pension schemes refer to legislation when defining how pension payments should be increased over time, and that is why they have automatically changed to CPI. Some will have explicitly stated the RPI for increasing payments. Others may have a mix (mine for example will increase deferred pensions by CPI, but pensions in payment will go up by RPI).

To complicate matters, some pension trustees may agree with a company to move from RPI to CPI if they deem it to be in the best interest of the pension members overall. This may occur if the company is struggling and by reducing liabilities the trustees see that as the best way of securing the long term future/stability of the fund.

JohnB47

Shimrod, I felt exactly as you do but most of us current and future BT pensioners have been shafted nonetheless.

We had a letter from BT saying that, apart from Section C pensioners, the scheme rules say that they must apply CPI 'cos they're tied to what the government decides to do. We also had a letter from the Trustees saying, effectively, don't blame us, there's nothing we can do, it's all the governments fault. So much for "The trustee has to act in the best interests of the pensioners, and cannot (should not) make decisions that will be to the detriment of the pension scheme members."

It seems that people are wakening up to this swindle very slowly. And many think, well it's only around 0.8% difference per year, what's the fuss? They don't realise the massive impact that this year on year compounded difference will make. Because the change is forever, not just until the country emerges from the disaster caused by the banks. It's what polititions are really good at - bring in a seemlingly innocuous change knowing that the people effected are too dumb/apathetic to understand the full impact.

As I said in a letter to my MP, why would anyone start a pension when they see governments doing this sort of thing.

sandsy

JohnB47 wrote: »

We had a letter from BT saying that, apart from Section C pensioners, the scheme rules say that they must apply CPI 'cos they're tied to what the government decides to do. We also had a letter from the Trustees saying, effectively, don't blame us, there's nothing we can do, it's all the governments fault. So much for "The trustee has to act in the best interests of the pensioners, and cannot (should not) make decisions that will be to the detriment of the pension scheme members."

Shimrod explained it well - many pensions schemes trust rules are worded in such a way that automatically links the increase rate to the government orders. So if the givernment changes the basis on which the orders are calculated, the trust deed ties their hands - unless they can be persuaded to change it.

In most cases, they won't - because they have to protect the rights of ALL members, not just existing pensioners. There will usually be many active and deferred members too. And in most cases, there interests (and yours!) are best served by having a solvent scheme which doesn't go into deficit more than it needs to. And the chances of deficit are reduced by linking revaluation and indexation to CPI rather than RPI.

The_Economist

Shimrod wrote: »

But the company doesn't run the pension - it is run by trustees. Some of the trustees will be company nominated and some (if the pension members show any interest) will be nominated by the active, deferred and pensioners themselves. The trustee has to act in the best interests of the pensioners, and cannot (should not) make decisions that will be to the detriment of the pension scheme members.

Many pension schemes refer to legislation when defining how pension payments should be increased over time, and that is why they have automatically changed to CPI. Some will have explicitly stated the RPI for increasing payments. Others may have a mix (mine for example will increase deferred pensions by CPI, but pensions in payment will go up by RPI).

To complicate matters, some pension trustees may agree with a company to move from RPI to CPI if they deem it to be in the best interest of the pension members overall. This may occur if the company is struggling and by reducing liabilities the trustees see that as the best way of securing the long term future/stability of the fund.

What company do you work for or did work for.

Shimrod

The_Economist wrote: »

What company do you work for or did work for.

I'm not sure how that is relevant.