LPGS active member CPI question

Random47

From LPGS web page: https://www.lgpsmember.org/2021/12/19/pensions-increase-2022/ 

Active pension accounts, deferred pensions and pensions in payment are adjusted each April in line with inflation. The rate of inflation, as measured by the Consumer Prices Index, was 3.1% in September 2021. This is generally the measure that is used to increase LGPS pensions the following April and we expect this to be the increase that applies in April 2022. We are waiting for the Government to confirm that active pension accounts, deferred pensions and pensions in payment in the LGPS will increase by 3.1% in April 2022

My question is why does an active pension account get the CPI rise?
Surely the employee gets the cost of living pay rise as still working and this contributes to FS DB and any post 2015 CARE (or 2022 if opt to take McCloud judgement version) include the annual cost of living rise as well, so why would CPI be applied?

My understanding is (correct me if I am wrong):

• Active pension account is a LA pension member still working in LA and not receiving pension yet. 
• Deferred is previous member no longer paying in and not yet getting paid pension (i.e. left Local Authority job and not yet retired)
• Pension in payment is previous LA employee pension member now retired and getting paid pension

Perhaps the LPGS guru Silvertabby knows?

hugheskevi

Random47 said:

My question is why does an active pension account get the CPI rise?

Because that is the rate of revaluation of accrued pension applied to career average pension, as set out in the scheme rules.

Surely the employee gets the cost of living pay rise as still working and this contributes to FS DB and any post 2015 CARE (or 2022 if opt to take McCloud judgement version) include the annual cost of living rise as well, so why would CPI be applied?

Pay rises are not linked to cost of living. An increase in pensionable earnings would affect future accrual of career average pension. Revaluation deals with career average pension that has already been accrued.

This is rather the whole point of career average pensions as compared to final salary - if linked to final salary then revaluation of accrued pension is linked to individual pensionable earnings growth, but if career average it is linked to CPI.

NedS

hugheskevi said:

This is rather the whole point of career average pensions as compared to final salary - if linked to final salary then revaluation of accrued pension is linked to individual pensionable earnings growth, but if career average it is linked to CPI.

Which is great if you work for an employer where pay generally lags inflation or is near stagnant (Civil Service, *cough*)

Silvertabby

Just to clarify, In the case of active members the CPI revaluation is only applied to the CARE pension, not any final salary benefits accrued before April 2014.  In the cases of deferred/in payment CPI is applied to the whole pension (subject to SPA/GMP).

But, yes, this along with the higher accrual rate of 1/49, still makes the CARE pension very attractive.

When the details were first announced my colleagues and I were .... amazed......

GunJack

They changed my company DB to CARE around 6 yrs ago, and the accrued pension increases at CPI+1.5%, which is good as they converted the accrued DB to CARE, so the whole lot gets CPI+1.5......

...and now, from next April, that CARE scheme will be stopped to future accrual and will be deferred (and will still increase by CPI+1.5) and they're moving us onto a DC scheme   

Glad I've got my deferred CS DB in the back pocket...