Former Conservative Shadow pensions minister Nigel Waterson has compared the Government’s decision to switch pension indexation from RPI to CPI with Gordon Brown’s infamous raid on pension funds in 1997.
In an interview in this week’s Money Marketing, Waterson reveals the decision was never discussed during his time in opposition, indicating the move has been pushed through by the Treasury as a means of cutting costs.
Waterson says: “I was not involved in any discussions in opposition about switching to CPI. This seems to have come straight out of the Treasury.
“I can see the economic logic to it but I think there is a comparison with Gordon Brown’s raid on pension funds back in 1997. Nobody really understood the effect it was going to have on pensions at first but in the end people went out demonstrating in the streets.”
Brown was vilified for his decision as Chancellor to scrap tax relief on dividends paid into pension funds, a move experts say has cost defined-benefit pension schemes £100bn.
The Government has claimed that CPI is a more appropriate measure of inflation than RPI, although there is no record of the Conservatives or the Liberal Democrats mentioning this before the coalition was formed.
Recently published estimates from the Department for Work and Pensions suggest the decision, announced by Chancellor George Osborne in the emergency Budget on June 22, will cost members of pension schemes £85.9bn.