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‘Switch from DB before CPI move’

Pension experts are recommending people who plan to transfer out of final-salary schemes to make the move while valuations are still being calculated using the retail price index, which is generally more generous.

Last month, the Government announced that private sector pension schemes could link increases to the consumer prices index rather than RPI in a move consumer groups claimed was a “stealth cut on the pensions of Middle Britain”.

Pensions minister Steve Webb said: “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.”

The move is expected to help plug the hole in company pension schemes as CPI has historically risen by around 0.5 per cent less than RPI, meaning pensions, and employers’ liabilities, rise more slowly.

Money Marketing revealed last week that the public sector has frozen transfers until it can calculate values using CPI but the Association of Consulting Actuaries says the majority of private sector schemes are still providing transfer values based on the RPI.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “For the vast majority of people, it does not make sense to transfer out of a final-salary scheme, even if it is switching to CPI uprating. However, for those who want to transfer out, there is a window of opportunity while schemes are still using RPI to calculate transfer values. Once they switch to CPI, you can expect transfer values to go down.”


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