CPI link for private pensions labelled stealth cut
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The Government is set to index private sector pension increases to the consumer prices index in a move that consumer groups claim is a “stealth cut on the pensions of middle Britain”.
Pension increases for private sector schemes are currently indexed in line with retail prices index.
But a statement from pensions minister Steve Webb states: “The Government believes the CPI provides a more appropriate measure of pension recipients’ inflation experiences and is also consistent with the measure of inflation used by the Bank of England.
“We believe, therefore, it is right to use the same index in determining increases for all occupational pensions and payments made by the Pension Protection Fund and Financial Assistance Scheme.”
But the trades union congress has slammed the move claiming that today’s pension payments would be 14 per cent lower if they had been linked to CPI instead of RPI for the past 20 years.
General secretary Brendan Barber says: “The new Government undoubtedly deserves praise for their early commitment to linking the state retirement pension to the higher of earnings or prices but it now looks as if most other pensions will go up less than they used to in most years.
“Over someone’s whole retirement this will add up to a significant loss. This is a stealth cut on the pensions of middle income Britain.”
CPI is less than RPI in most years because it excludes housing and council tax costs. Despite this, CPI is on average half a per cent less than RPI because it is calculated differently, according to TUC.
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Readers' comments (1)
Sean | 9 Jul 2010 8:25 am
This must not be allowed to happen. The main cost to pensioners is housing and council tax costs. And the government is proposing breaking the link with the increases in these costs - scandalous.
Although I voted Tory at the last election this is old Tory thinking - the rich wont be impacted by this move (if you're on a substantial pension already the lack of increases wont impact as much) but the majority will.
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