Lord McFall slams Govt over impact of RPI change on pensions

Former Treasury select committee chair Lord John McFall has attacked the Government over proposed changes to the calculation of the retail prices index and its impact on pensions.

McFall was responding to a question tabled by Lord Naseby on the Office for National Statistics’ consultation to change how RPI is calculated.

The ONS is consulting on whether to calculate RPI in the same way as the consumer prices index, which is usually lower.

The moves could see the RPI drop by up to 1 per cent, hitting index-linked pension funds and pensioners. The National Association of Pension Funds warns it could have “huge implications” for pension investments.

McFall said: “The Government knows that pensions funds are major investors in Government debt and any change to index-linked bonds will have far reaching implications.

“How will the growth agenda, which is non-existent right now, prosper without pension funds that the Government wants to get involved in infrastructure?

“And with pensioners taking even less from their pension with the CPI, why are we disproportionately paying for the Government’s deficit reduction programme?”

Lord Naseby hit out at the “quiet as a mouse” ONS consultation, claiming the only beneficiary from the changes is the chancellor.

Speaking for the Government, whip Lord John Gardiner said it is an independent, technical consultation.

He said: “It is a consultation and it is only at a later stage in special circumstances that ministers would become involved.

“If a recommendation was made by the ONS, then the Bank of England would be consulted on whether any proposal would be a fundamental change to the calculation of the RPI that would be materially detrimental to the interest of holders of relevant index-linked gilts.

“It is only at that stage if the Bank considered a change to the RPI to be fundamental and materially detrimental that the agreement of the chancellor is required. None of us should prejudge an independent consultation.”

The ONS consultation began on 8 October and closes on 30 November. Any changes will be announced in January and implemented in March.

Royal London head of corporate affairs Gareth Evans says: “Fiddling around with RPI just gives people another reason not to take out a pension if they don’t don’t what they are going to get in return.”