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Nigel Waterson compares RPI-CPI move to Brown’s raid on pensions

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.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Effects on pensions? A never ending story. This week footballers’ elbows and air rifles seem to have had more attention than raids on pensions. The TV news stories on this week’s damaging ECJ ruling majored on motorists and not on future pensioners. The future is in the future.
    So much seems to be demanded of our industry in the interests of improving investor confidence. Unfortunately it hardly seems to be the shared responsibility that, in reality, it is.

  2. Its about time this got some coverage. Not only does CPI exclude some of the higher increase items, but it is calculated in a different (and less generous) manner. I left the civil service a few years ago with 13 years service and a modest deferred pension entitlement of a few £1,000 at the age of 35. By the time I get to 60 a CPI based increase rather than RPI will have wiped it out. And of course they don’t tell you this at all. I feel very aggrieved. Anywhere else it would be illegal – but all the Government have to do is change the law and its deemed acceptable. This is a massive erosion of existing rights rather than future rights, which has always been sacroscant.

  3. Waterson was not involved in (m)any discussions at all anyway – he was only given a Pensions title because he needed to shore up support with Eastbourne voters.

  4. richard slater 3rd March 2011 at 3:57 pm

    This measure was slipped into the Budget speech very quietly: Osborne merely mentioned that the State 2nd Pension would be linked with CPI, carefully omitting to say that this would apply to all public sector pensions. Webb’s argument that the CPI reflects pensioners’ inflation better than RPI is nonsense. One consolation. We have the vote. Use it to get this lot out at the next General Election

  5. The claim by Anonymous that Waterson “was only given a Pensions title because he needed to shore up support with Eastbourne voters” is nonsense. Waterson had been his party’s leading aurhotrity on pensions for many years. I suspect his experience is sadly missed though personally I ofeten disagreed with his views..

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