Will my pension keep pace with inflation?

hyubh

arnoldy said:

Silvertabby said:

Don't forget to factor in that public sector increases are uncapped, whereas most private DB schemes are capped at 5%.

This hasn't been so much of an issue over the last 20 years or so of low inflation, but....

Actually its worse than that. Most (not all) private sector DBs will have parts of the same pension capped at 0%, 2.5% and 5%. Even that is dependent on the funding level of the scheme - it needs to be 105% + - otherwise you get nothing.

The latter part is false... Statutory index linking for post-97 pension applies regardless.

arnoldy

hyubh said:

arnoldy said:

Silvertabby said:

Don't forget to factor in that public sector increases are uncapped, whereas most private DB schemes are capped at 5%.

This hasn't been so much of an issue over the last 20 years or so of low inflation, but....

Actually its worse than that. Most (not all) private sector DBs will have parts of the same pension capped at 0%, 2.5% and 5%. Even that is dependent on the funding level of the scheme - it needs to be 105% + - otherwise you get nothing.

The latter part is false... Statutory index linking for post-97 pension applies regardless.

Yes, apologies - I concede your point about post 97 rises - they are not dependent on funding unless the PPF situation arises. They are only capped.

The index caps apply as follows:
There are statutory minimum requirements on them to: Index pensions in payment in line with inflation, capped at 5% for benefits accruing from service between April 1997 and April 2005, and at 2.5% for benefits accruing from April 2005 – known as Limited Price Indexation (LPI) (Pensions Act 1995, s51);

For pre 97 pension accrual rises are not statutory. This is a typical statement on most private DBs, it's worth checking the small print in your private DB.
"Yearly 2% increase up to 2023. From 2024, increases of up to 2% a year as long as the Fund retains a surplus of at least 105%"

commonslibrary.parliament.uk/research-briefings/sn05656/

DT2001

arnoldy said:

Silvertabby said:

Don't forget to factor in that public sector increases are uncapped, whereas most private DB schemes are capped at 5%.

This hasn't been so much of an issue over the last 20 years or so of low inflation, but....

Actually its worse than that. Most (not all) private sector DBs will have parts of the same pension capped at 0%, 2.5% and 5%. Even that is dependent on the funding level of the scheme - it needs to be 105% + - otherwise you get nothing.

Highlights the pensions apartheid between Public DBs, Private DBs, and DCs.

As long as you know what is going to happen you can plan. When calculations change or what will happen is in the small print or worse still the information you get from administrators in incorrect (I think because pensions are too complex) it is frustrating.
I have a large GMP element at 65 (3+ years away) with 1/3rd of my total pension getting no increase and 1/3rd CPI max 3%. It is looking less rosy but hey ho it was non contributory and I’ll tweak other investments .

Malthusian

sevenhills said:

It would depend on what has been done previously and what has been agreed. I have agreed certain terms with my mortgage company, I cannot change those terms just because I am in debt due to a pandemic.

The State Pension is not a mortgage or any kind of other asset or contract, as confirmed by the High Court ruling in Regina v WASPI.

It is a State benefit. The State giveth and the State taketh away again. Blessed be the name of the State.