The CPI Pension Swindle

Additionally there is now talk of not using the existing September figure for calculation. Instead the intention appears to be to use an averaging figure presumabley based on 12 months.

There was talk it would be used in the Autumn statement. In the end it was not used.

Perhaps this time such an average would have been higher than September figure.

No doubt one to watch out for in the future.

The government is facing up to some difficult realities:
1. A long legacy of unsustainable pension promises.
2. It's problematic to go back on any part of your predecessors' pie-in-the-sky promises or implied promises (today's strikes).
3. And it's politically impossible to touch today's pensioners - the ones who are getting a far better deal than we can afford.

It's an ugly stealth move, but its net effect may be to rebalance the system a little and improve generational fairness.

nuages0:
I believe that the article is referring to Old Age Pensions from the Govt.

My own pension was caught up in this very nasty stealth tax. It is  a private sector fully funded scheme (at the last actuarial valuation), however as the scheme indexing  rules refer to increases as defined by government, I will in future get CPI. This  has nothing at all to do with affordability, but just as  nuages says monumental incompetence by Webb, so that circa 50% of private pensions get CPI and the rest RPI. This is undoubtedly the biggest stealth tax in pension history, it is also probably the most incompetent, as government are reducing the pension income of members of fully funded schemes.You really could not make it up!

The switch to CPI affects Public Sector Pensions as well as State Pensions and is just another element in the assault on the likes of nurses and Council staff. However there is some doubt about the legality of applying this measure to existing Public Sector pensioners as the RPI was part of the contract when staff paid into their pension pot. There does not seem to be any provision that allows the Government to suddenly switch the annual revue to CPI just because it is lower than RPI. Strangely the Bank of England pension scheme will carry on using RPI for their annual increase!

@RedundantHippie Given yesterday's events this may not be the best time to admit to being a public sector pensioner but "I'm Spartacus". For nearly 20 years I paid for added years on my pension at full cost to me which at times almost equalled my mortgage payments. I did so on the clear understanding that I would receive RPI indexing. When I retired in March 2010 all the documents about my pension referred to RPI. A couple of months later I was f**ked over in the first ConDem budget and the change from RPI to CPI which didn't just affect my basic public sector pension but also the added years which I'd paid for out of my own pocket. I consider I've been the victim of (at best) mis-selling if not theft and fraud. Various bodies, including the Civil Service Pensioners Alliance, have taken the government to a Judicial Review the result of which is awaited. However the law is complicated and Unison, no less, are of the opinion that it would appear to give the government the necessary discretion to do what it did. Regrettably the legislation would seem to allow the government to estimate price increases “in such manner as it thinks fit” and if Unison are correct the outcome of the judicial review is likely to be in their favour.

Rober00

If inflation falls in 2012 which we are told will happen ( whether we believe it is another matter) then inflation in September 2012 should be lower than the average for the previous 6 months which os probably why it was not introduced

Moan, moan, moan. Why has no-one mentioned that the Government has re-introduced the connection between state pensions and average earnings, which Margaret Thatcher removed and oh-so-generous New Labour failed to restore? Campaigners for senior citizens have been harping on about this for years, but now they have it, they go on about RPI-CPI, the removal of free bus passes and so on, as if they are god-given rights. Free bus passes and TV licenses and huge winter fuel payments for all pensioners, irrespective of income, are a relatively new phenomenon and should not be regarded as immune from cuts just because pensioners play the Old Age card.

As a working person I think pensioners shold stop harping on about the 75 pence rise a few years ago and remember that they will be getting a 5% increase in their state pension next year, whilst most ordinary people have wage freezes or wage cuts, or short-time working. I would *love* to be getting a 5% pay rise, but I'm not going to get one, and meanwhile I still have to pay taxes for today's state pensioners. They may beat their sticks on the ground and say "I paid my way and earned my entitlement" when they were working, but it's not a level playing-field: there were fewer pensioners in their day and they had much lower longevity so the workers had less to pay. Of course I'm willing to stand corrected if someone can show me that the real costs of state pensions and as a proportion of median income haven't increased, and are not likely to in future, but on the face of it pensions (and associated healthcare costs) should be more burdensome, given the retirement of the baby boomers and increased longevity.

I agree with UncleEbenezer: pension promises made decades ago were unsustainable. Please face economic realities: whatever a pension scheme may say in the small print about index-linking when it was dreamt up 20 or 40 years ago, no one anticipated the huge increases in longevity or the improvements in healthcare that have occurred in recent years. If people expect to receive full pensions in their late 80s or 90s when the original actuaries predicted the beneficiaries would shuffle off in their mid-70s, something has to give: even fully-funded schemes are highly vulnerable if the current increases in longevity and the deeply depressed real returns on investment continue, especially when pension schemes are obliged to put so much of their money into bonds to pay for current pensioners, to the detriment of the interests of current contributors, who really want growth, not dividends.

In answer to the question posed by the article, the reply is that anyone who signed up to, was promised or who was offered RPI index linking is most certainly being cheated by a unilateral switch to CPI which, it seems, cannot even be challenged in the courts. The only reason for the government to make the switch, and do it without any consultation, is to save money.

Let's face it, why was CPI introduced in the first place? It was because being selective with the comparatives and excluding such nasties as mortgage interest, rent, council tax and buildings insurance (all of which were rising too fast for the government's liking at the time) from RPI to create CPI was a clever little wheeze to partially renege on promises to protect pensions and benefits from the ravages of inflation. Did we all suddenly stop paying mortgage interest, rent, council tax or insurance? Of course not!

I would not put it past this government to be now looking at the components of CPI to see what the current nasties are which could be excluded from a third version of the index to bring the figure down even further and save even more money. That they are robbing the poorest section of the community of a valuable and necessary protection while the rich grow ever richer at those poor people's expense seems not to bother the government in the slightest.

Having said that, there are sizeable swathes of the community who have been and are continuing to be forced into pension arrangements without any inflation protection at all and where the pensioner takes all the investment risks. If they have any length of retirement at all they will feel the pain of that in years to come as inflation progressively reduces what might have been a decent pension on retirement to a pittance. At 5% pa average inflation the purchasing power of your starting pension will be reduced by about 2/3rds over 20 years. Try living on that! Let us hope for their sakes that the predictions of a sudden and sustained major fall in inflation soon are correct.