RPI to CPI Early Day Motion 1032
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This change does not only affect Public and State pensions but private pensions as well and the Government does not save a penny there, that has nothing to do with reducing the deficit. I will try and answer your question though.
It doesn't affect private pensions - you can choose to buy a level pension or an RPI indexed one depending on your circumstances.
It doesn't affect private sector money purchase company pensions for the same reason
it only affects private sector final salary schemes if the scheme rules explicitly link to the legislation, most of those that do are former public sector (eg BT) and, lets be honest, there are few of them left.
Public sector pensions are affected but are taking legal action anyway
State pensions are affected but since they get the best of CPI, 2.5% or earnings the historical evidence is that they are better off than having RPI0 -
State pensions are affected but since they get the best of CPI, 2.5% or earnings the historical evidence is that they are better off than having RPI
As I understand it, there is no triple guarantee on SERPS/S2P and that will be CPI only from 2012.
PS I understand the government is planning to introduce yet another inflation index. See
http://www.thisismoney.co.uk/news/article.html?in_article_id=518556&in_page_id=2&ct=50 -
AIUI S2P will disappear & be merged into the basic state pension0
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You are right you can buy an RPI linked private pension and people have those but the Government is going to legislate to allow those pension schemes to revert to CPI even if they specifically say RPI. I refer you to a BBC article at bbc.co.uk/news/business-11764320It doesn't affect private pensions - you can choose to buy a level pension or an RPI indexed one depending on your circumstances.
It doesn't affect private sector money purchase company pensions for the same reason
it only affects private sector final salary schemes if the scheme rules explicitly link to the legislation, most of those that do are former public sector (eg BT) and, lets be honest, there are few of them left.
Public sector pensions are affected but are taking legal action anyway
State pensions are affected but since they get the best of CPI, 2.5% or earnings the historical evidence is that they are better off than having RPI
It starts as follows "Private sector pension schemes may be allowed to use the Consumer Prices Index (CPI) to protect pensions against inflation, the government says.
The Department for Work and Pensions (DWP) will begin consulting on new legislation soon.
This legislation will let schemes replace the traditional retail prices index (RPI) for inflation-proofing."
But then goes on to say schemes don't have to revert if they don't want to. So the law will be changed to allow them to change if they wish. I do not believe that schemes will not revert if they can get away with it so even people who directly paid for RPI indexing are also at risk of being moved onto the lesser CPI?
State pensions are not going to be better off having CPI because CPI does not cover housing costs, RPI does and RPI is mostly higher than CPI, the only time state pensioners will do better is if the average wage rise is higher than CPI and 2.5% from 2012 onwards.
In the meantime private and public pensioners will see their income fall below RPI and average wage increases each year from 2011 onwards with this change to CPI as it stands.
What about the widows of these penions, they will see their income fall over time. The forces pension is a good example, war widows will lose thousands of pounds, then there are the police and firemens widows, then BT, Britsh Gas etc widows that all will see their income fall over time, and they could be trying to bring up children on their own, so the children also will suffer.
The devil is in the detail and hence why a full impact analysis should be undertaken before any change is made to pension indexing.0 -
This change has been recommended by CPAC to the ONS and though it is being considered, nothing from the Government suggests that they will use it. Until the Government says that they are going to use a better measure, CPIh? then they should not use the lesser CPI as it stands. There is also a question of WHEN, 2 years is the figure to bring it in but again that is a recommendation not a fact.As I understand it, there is no triple guarantee on SERPS/S2P and that will be CPI only from 2012.
PS I understand the government is planning to introduce yet another inflation index. See
http://www.thisismoney.co.uk/news/article.html?in_article_id=518556&in_page_id=2&ct=50 -
I cannot believe the "anti" comments on here. No one is requesting those who consider themselves unaffected to take any action unless they wish to associate themselves with it.
The essence is that if the index used can be changed at whim the clause in the Trust Deed is worthless. The government are being underhand in respect of this. If CPI was a real and valid measure of inflation why does it not at least include Council Tax? Is that not a cost every pensioner has to meet?
Could it be that the government realise full well that once all the cuts begin to bite, and if more quantative easing is needed, inflation will begin to soar.
I suggest that each person affected actually replies to the trustees AND BT to complain. There is no doubt that all literature provided by each to scheme members never referred to pensions being "indexed linked" or "currently linked to RPI" but stated increases are linked to RPI. Have the members then not been misled, even if by negligence?
Though I don't dismiss union efforts their primary responsibility is to their members not former members so don't rely on them to necessarily reach an understanding with BT may benefit BT current or deferred pensioners.0 -
You are right you can buy an RPI linked private pension and people have those but the Government is going to legislate to allow those pension schemes to revert to CPI even if they specifically say RPI. I refer you to a BBC article at bbc.co.uk/news/business-11764320
It starts as follows "Private sector pension schemes may be allowed to use the Consumer Prices Index (CPI) to protect pensions against inflation, the government says.
The Department for Work and Pensions (DWP) will begin consulting on new legislation soon.
This legislation will let schemes replace the traditional retail prices index (RPI) for inflation-proofing."
Should have said Personal, not Private pension in the 1st paragraph. The legislation that has been changed does not affect Personal Pensions only final salary/defined benefit ones & the state pensions0 -
Just to clarify a few things.
There has been no indication that annuities linked to RPI will change to CPI - the defined contribution pension system and annuities should be unaffected.
Revaluation refers to the period between leaving a scheme (either due to changing employer, or a scheme closing) and pension benefits commencing. Indexation refers to increases to the pension once in payment.
The change to private sector pensions is with regard to statutory minimum revaluation and indexation for defined benefit schemes. The Government sets the minimum (which schemes can exceed if they wish) and this minimum will change from being based on RPI capped at 2.5% to being based at CPI capped at 2.5%.
In the case of revaluation, it is not a cap which is applied annually, and due to this many people will effectively be uncapped, and hence experience the full RPI/CPI difference.
Private sector schemes tend not to link to statutory indexation, but many link to statutory revaluation. Hence it is not pensioners which are most badly affected by this, but people in their 40s and 50s (an age by which they can have built up significant pension, but still have a long time to go to retirement, and hence for the RPI/CPI difference to erode the pension).
Then there are some schemes such as BT where the scheme rules link to the public sector rules, and hence get moved across to CPI due to the link.There is no doubt that all literature provided by each to scheme members never referred to pensions being "indexed linked" or "currently linked to RPI" but stated increases are linked to RPI. Have the members then not been misled, even if by negligence?
Literature will usually contain a note somewhere saying something like anything in the literature is for illustrative purposes only, and in the case of conflict scheme rules will take precedence.0 -
AIUI S2P will disappear & be merged into the basic state pension
I missed that - can you give me a weblink.
All I have seen is the proposal for those who retire after about 2015.This change has been recommended by CPAC to the ONS and though it is being considered, nothing from the Government suggests that they will use it. Until the Government says that they are going to use a better measure, CPIh? then they should not use the lesser CPI as it stands. There is also a question of WHEN, 2 years is the figure to bring it in but again that is a recommendation not a fact.
Here is my forecast. The new inflation index will be defined and then it will need a name and it will be called ..... the RPI. There is a precedent for this - the USA in 1999 did something similar and reduced all social security payments substantially.
I think the government will be forced into doing this because it will lose legal challenges over the current proposals in 2 specific areas where people will be able to prove they would have taken different decisions if they has known indexing was to be CPI rather than RPI. Those 2 areas are (1) added years AVCs where the contribution rates have been determined by actuaries on the basis of no employer contribution and RPI indexing and (2) commutation ratios which have been set by actuaries using similar assumptions and pensioners have chosen the pension over the lump sum - in some cases after getting quotes from private companies about RPI annuities. These legal challenges will fail if the RPI is redefined in the way I have suggested.0 -
Anyway,
I've had a reply from my MP (Damian Green) He doesn't support the early day motion
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