Tata pension - change from RPI to CPI and maybe more

antrobus

kidmugsy wrote: »

Good. But in that case what the devil has it got to to do with HMG?....

You could equally well ask, what the devil has it got to to do with HMG that Tata wants to sell and/or close down its UK steel business?

kidmugsy

antrobus wrote: »

You could equally well ask, what the devil has it got to to do with HMG that Tata wants to sell and/or close down its UK steel business?

I concur. Bust companies close down all the time. HMG is playing to the gallery. I dare say it'll stop once the referendum is over.

kidmugsy

Shedman wrote: »

Can't say I'd have a lot of sympathy for anyone that resisted this proposed change. My former company's scheme changed to CPI from RPI and cap reduced from 5% to 2.5% and this was and is a profitable FTSE100 company not a massively loss making white elephant. Much as we would have liked existing terms to have stayed as they were, the alternatives were worse. That's life at the moment unfortunately

Did the change of rules affect the pension rights you had already accrued?

PensionTech

Did the change of rules affect the pension rights you had already accrued?

Although I don't know Shedman's circumstances, my guess is that:

In the case of RPI moving to CPI: Yes
In the case of the cap reducing to 2.5%: No

You almost certainly already know this but the change to CPI did affect an awful lot of accrued rights. The principle was essentially that many scheme rules provided revaluation/increases in line with the general level of inflation, and though decades of experience and communications had led everyone to believe that RPI would always be used (because it was when RPI was the official inflation measure), the change in the government's use of RPI to CPI meant that benefits that had been accrued under the assumption that they would be RPI-linked became CPI-linked.

The schemes that kept RPI weren't better-quality schemes. It was a lottery; those who had written the words "Retail Prices Index" rather than just referring to the relevant legislation had to keep RPI, because to change to CPI would mean an actual amendment of the rules, which couldn't be certified as being actuarially equivalent. Those who did just refer to the relevant legislation did not have to make any such modification. Luck of the draw. Some fruitless legal challenges were brought but as they essentially had to rely on a claim that pension scheme members would have acted differently had they known that CPI rather than RPI would be used (which is a bit desperate; you could probably count on one hand the number of people who signed up to DB pension schemes because of their intricate knowledge and assumptions about the various measures of inflation), they were shut down fairly easily.

It seems that British Steel were one of those who had RPI hard-coded into the rules. I am not necessarily against the idea of them moving from RPI to CPI; it would be a better outcome for the members. But the precedent it sets is really dangerous, and I'm quite concerned about the Business Secretary and other people who probably "don't understand pensions" waving it off. It would require fundamentally undermining the protection of accrued benefits - which is covered by both UK and EU law, for good reason. The circumstances aren't particularly special, so I don't know why we should be thinking about such drastic action just for this employer, and I don't think it would be possible to prevent it from being abused by other employers. Unless legislation were to be passed with specific reference to the British Steel scheme - but then it still leaves the door open for any government to decide that another scheme is just as deserving of the special measures, according to whatever criteria they please.

Thrugelmir

PensionTech wrote: »

It would require fundamentally undermining the protection of accrued benefits - which is covered by both UK and EU law, for good reason. The circumstances aren't particularly special, so I don't know why we should be thinking about such drastic action just for this employer, and I don't think it would be possible to prevent it from being abused by other employers.

This scheme is only the tip of the iceberg in terms of shortfalls. The days of magically dividing a cake into more pieces than exist are over. There's no longer monetary inflation to hide behind.

veryintrigued

kidmugsy wrote: »

Bust companies close down all the time. HMG is playing to the gallery.

Not ones which are the only suppliers of UK steel for its defence industry.

Losing the UK capability for manufacturing plate for its battleships or nuclear submarines (for instance) could be considered quite important (for some).

Andy_L

veryintrigued wrote: »

Not ones which are the only suppliers of UK steel for its defence industry.

Losing the UK capability for manufacturing plate for its battleships or nuclear submarines (for instance) could be considered quite important (for some).

We haven't made battleships since the 1940's & nuclear submarines aren't made out of the sort of bog-standard steel that Tata has been unable to make a profit producing.

Seeing as how we don't have an indigenous source of iron ore anyway the strategic importance of steel making is over rated

uk1

kidmugsy wrote: »

What will the effect be on every other pension saver in the country if it turns out that a government is prepared to change the law with retroactive effect just because of political hysteria over one, not very important, company?

The government already preserves the right to change UK state pensions retrospectively.

They change the number of years NI contributions that you need to qualify for example. Some people sometimes benefit, sometimes people suffer.

Another consequence of those NI changes are that governments write to you to tell you that you will need to make voluntary contributions to make up years. Once they hayve your cash they then reduce the years qualification and keep your cash. If an insurance company did that it would be misselling and you would expect the government to criticise them and expect them to offer a refund and compensation.

antrobus

Andy_L wrote: »

We haven't made battleships since the 1940's ....

That's because nobody makes battleships these days. There are no battleships in service any more. Haven't you seen the film?

kidmugsy

uk1 wrote: »

The government already preserves the right to change UK state pensions retrospectively.

True but irrelevant. The govt apparently now proposes to interfere in contracts between members and their schemes. All over some tuppenny-ha'penny firm going bust.