Pension Increases to be Linked to CPI instead of RPI



Pensions will now be linked to CPI and that is expected to save employers when it comes to benefit liability.

Pensions will now be linked to CPI and that is expected to save employers when it comes to benefit liability.

The Minister of State for Pensions has announced that public pension increases will be linked to the Consumer Prices Index (CPI) rater that the Retail Prices Index (RPI).  Private sector will be doing the same.  The changes are to take effect in 2011.

Because of how CPI and RPI are calculated, it is anticipated that the savings to pension schemes will make them more affordable to employers.  The liability could be reduced by as much as 10 per cent or 1oo billion pounds.

The Minister’s statements have made it clear that the changes will be able to be applied to benefits built from the date of the change but also those accrued.  However some may have stipulations that will prohibit changes to any benefits other than those that begin after the change takes effect.

Comments & Debate

  1. August 13, 2010 at 12:27 pm Gordon Solomon Commented:

    When I retired I had various final salary pension scheme options. I chose to take a reduced pension and a smaller lump sum to link my pension with the RPI. I calculated that I would break even in about 12 years time. Under the new regulations this will now be in 24 years time, when I am 90 years old. Surely this move cannot be legal.

  2. August 24, 2010 at 11:12 am Michael Turner Commented:

    Unfortunately it will be implemented by Act of Parliament, and therefore definitely legal,

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