Is RPI Changes To DB Pension The Next Misselling Scandal

lookafterpennies

I know the new pension reforms brought big changes and freedoms to peoples pension planning. Anyone lucky enough to have a final salary pension can after taking advice, decide if they are better to stick with the DB pension with its guaranteed inflation busting RPI increases or take the transfer value (pot) and decide how this money is invested to last thier retirement. However if the RPI is to be replaced with a less generous CPI or CPIH, could we see a raft of complaints or even misselling claims on the back of this or may the pension funds have to address this shortcoming due to the fact that all the literature they produce quotes the RPI as the rate of increase albeit capped at a certain percentage. I know this might sound like small amounts but compounded over a number of years would be a large amount of money which could mean a different decision would have been more appropriate. 

daveyjp

How is using RPI 'inflation busting' when its an actual measure of inflation?  Inflation busting would have to be RPI plus x%!

I'm also confused how you see a DB pension being 'mis-sold'.  DB pensions are generally offered as part of a employees contract.  They aren't sold, you either opt in or out.

Any mis selling would surely be the other way when someone decided to withdraw from the DB and invest in a DC scheme after taking advice.

John_

lookafterpennies said:

I know the new pension reforms brought big changes and freedoms to peoples pension planning. Anyone lucky enough to have a final salary pension can after taking advice, decide if they are better to stick with the DB pension with its guaranteed inflation busting RPI increases or take the transfer value (pot) and decide how this money is invested to last thier retirement. However if the RPI is to be replaced with a less generous CPI or CPIH, could we see a raft of complaints or even misselling claims on the back of this or may the pension funds have to address this shortcoming due to the fact that all the literature they produce quotes the RPI as the rate of increase albeit capped at a certain percentage. I know this might sound like small amounts but compounded over a number of years would be a large amount of money which could mean a different decision would have been more appropriate. 

Are you claiming that you chose a different career based on this?

I’m doubtful if that’s the case.

jamesd

You can't mis-sell a DB pension and except in the public sector they aren't guaranteed to keep up with inflation because there's a cap on increases, most often 5%.

lookafterpennies

The point I was trying to make was;-
If any one recently took their DB pension, they may have compared the scheme benefits against the transfer value, an attraction and possible factor in choosing the DB pension could be the ongoing and compounding RPI increases, however the RPI measure is to be replaced with a less generous measure (CPIH - ave l% less PA) this change could equate to thousands or tens of thousands of pounds over the life time of the pension and thus could have influenced the initial decision to either take the DB pension or take a transfer value. 

dunstonh

 could we see a raft of complaints or even misselling claims on the back of this or may the pension funds have to address this shortcoming due to the fact that all the literature they produce quotes the RPI as the rate of increase albeit capped at a certain percentage.

No chance whatsoever.    You cannot complain about being missold something that was not sold to you.

I know this might sound like small amounts but compounded over a number of years would be a large amount of money which could mean a different decision would have been more appropriate. 

And what alternative do you think could have been more appropriate (hint:  there wasn't one)

daveyjp

lookafterpennies said:

The point I was trying to make was;-
If any one recently took their DB pension, they may have compared the scheme benefits against the transfer value, an attraction and possible factor in choosing the DB pension could be the ongoing and compounding RPI increases, however the RPI measure is to be replaced with a less generous measure (CPIH - ave l% less PA) this change could equate to thousands or tens of thousands of pounds over the life time of the pension and thus could have influenced the initial decision to either take the DB pension or take a transfer value. 

The change is 'planned' for 2030, that's 3 Governments away.

Anyone who has just taken a fully paid up DB pension will be at least 70 by 2030. The effects won't be worth worrying about and regardless its not miss selling.

DB pensions have changed significantly over the years, many are now CARE and not DB.  Should those moved to CARE be suing somone for mis selling?  If you think so let them know, you'll be a millionaire by Christmas.

kinger101

lookafterpennies said:

RPI measure is to be replaced with a less generous measure (CPIH - ave l% less PA)

RPI isn't being replaced.  It's just being calculated differently.

Thrugelmir

daveyjp said:

lookafterpennies said:

The point I was trying to make was;-
If any one recently took their DB pension, they may have compared the scheme benefits against the transfer value, an attraction and possible factor in choosing the DB pension could be the ongoing and compounding RPI increases, however the RPI measure is to be replaced with a less generous measure (CPIH - ave l% less PA) this change could equate to thousands or tens of thousands of pounds over the life time of the pension and thus could have influenced the initial decision to either take the DB pension or take a transfer value. 

Anyone who has just taken a fully paid up DB pension will be at least 70 by 2030. The effects won't be worth worrying about and regardless its not miss selling.

A 0.8% compounding differential will mount up. 

Marcon

lookafterpennies said:

The point I was trying to make was;-
If any one recently took their DB pension, they may have compared the scheme benefits against the transfer value, an attraction and possible factor in choosing the DB pension could be the ongoing and compounding RPI increases, however the RPI measure is to be replaced with a less generous measure (CPIH - ave l% less PA) this change could equate to thousands or tens of thousands of pounds over the life time of the pension and thus could have influenced the initial decision to either take the DB pension or take a transfer value. 

And who do you feel should be paying compensation for this alleged 'misselling'? Schemes are subject to over-riding legislation, which neither they nor even the best-informed financial adviser can predict.

Brynsam

lookafterpennies said:

Anyone lucky enough to have a final salary pension can after taking advice, decide if they are better to stick with the DB pension with its guaranteed inflation busting RPI increases or take the transfer value (pot) and decide how this money is invested to last thier retirement. However if the RPI is to be replaced with a less generous CPI or CPIH, could we see a raft of complaints or even misselling claims on the back of this or may the pension funds have to address this shortcoming due to the fact that all the literature they produce quotes the RPI as the rate of increase albeit capped at a certain percentage. 

We are a decade away from this proposal being implemented - lots of other things could change in the next decade. Neither pension schemes nor those giving financial advice can be held responsible for the government doing something which tilts the playing field. Now the idea has been floated, doubtless advisers will take it into account before advising individuals not to transfer.

People will always complain (this sort of ill-informed post eggs them on to do just that), but any complaints should be addressed to their MP. There won't be any offers of redress from any other direction!