Company/Trustees Impose Pension Change

Retyre

Have a final salary scheme due to become payable in 15 years or so and I noticed the inflation proofing had changed from RPI to CPI which I figure will be worse for me and less costly for the company.

I take it the company can make these changes if it gets the approval of the trustees or something is written in the trust deed and rules to allow it?

Is it worth complaining, would value views?

Financial_Saddler

If the Trust deed and rules allow it, such a change can be made for future pension accrual.
However, it would not be applied to pension entitlements accrued to the point at which the change is agreed.
If this is the only change being made to your scheme, then the scheme is in a better place than many others.
Is it still open to new members?

dunstonh

This made the news several years ago.
http://www.telegraph.co.uk/finance/personalfinance/pensions/8930868/Public-pensions-switch-from-RPI-to-CPI-declared-lawful-by-the-High-Court.html

Linton

Depends if your employment contract directly or indirectly defines which index is to be used. It will probably be worse for you either way - your pension will be lower than otherwise, or you will have to pay an increased contribution, or the company will have to pay an increased contribution possibly decreasing its ability to fund pay rises. There's no free lunch option with the costs of providing a pension increasing because of increased longevity.

As to whether it matters: for the past 9 years of retirement I have lived on a planned budget that I increase with CPI, and have found that to be adequate to match increases in expenditure arising from increased prices.

Retyre

Thank you kindly for your replies. I read further in the Telegraph which states The National Association of Pension Funds (NAPF) says about a quarter of occupational pension schemes are legally able to switch from RPI to CPI so I guess I may ask the question.

This however does not bode well:
http://www.ftadviser.com/2013/07/11/pensions/personal-pensions/rpi-to-cpi-pension-switch-is-lawful-YHZikajY647EDQAidotFiM/article-0.html

I'm out of Service and the scheme is closed to new members.

I'm not sure if the trust deed and rules did not allow for future changes whether the trustees are able to make decions on this type of change. Looking at this the loss is not something to take lightly:

http://www.telegraph.co.uk/finance/personalfinance/pensions/8929766/Pensioners-to-lose-thousands-after-inflation-measure-change.html

xylophone

You need to ask for a copy of the scheme rules(not just the scheme booklet).

http://www.shoosmiths.co.uk/client-resources/legal-updates/arcadia-group-ltd-v-arcadia-group-pension-trust-8301.aspx

Seabee42

This very much depends on how the wording in the particular rules was written and what you have been told about increases in writing.

One scheme I run the wording in the rules specifically picked up any changes in Government rules and therefore automatically picked up the change to CPI. Another specifically mentioned RPI and therefore does not use CPI for pension increases and still does not.