Private pension indexing to be switched to CPI

Posted on Jul 09, 2010

Pensions Minister, Steve Webb, has announced plans to switch the inflation index used to increase private sector pensions from the Retail Prices Index (RPI) to the Consumer Prices index (CPI). The change will affect around five million people in final salary pension schemes, as well as payments made by the Pension Protection Fund and Financial Assistance Scheme.

Industry reaction has generally been positive. The NAPF agreed with the move to apply the changes already introduced in the public sector. Joanne Seagers, NAPF Chief Executive, commented "This gives final salary pensions some breathing space, and it will make it easier for firms to keep schemes open."

However, TUC General Secretary Brendan Barber was more critical of the effect he changes will have on pensioners' savings, commenting that "Over someone's whole retirement this will add up to a significant loss."