Greengates Builders Merchants

Private Pension Worry Says Greengates Builders Merchants Accrington, Lancashire

A group of pension industry experts has attacked plans to link private pension increases to the Consumer Prices Index measure of inflation.

The experts say many pensioners have been promised annual rises linked to the Retail Prices Index.

The change to inflation proofing came from the government last month.

The government had "already decided that Consumer Prices Index is the most appropriate measure of inflation for state benefits, and it is appropriate to take a consistent approach for private pensions", said a spokesman.

The CPI measure of inflation has generally risen by 0.7% a year less than Retail Prices Index.

In the next five years the gap between the two is likely to be even higher, at 1.2% a year, according to data from the recently established Office for Budget Responsibility (OBR).

The government now intends to use CPI for the uprating of state pensions, state benefits and also for the inflation-related increases built into the big public sector pension schemes.

These changes will lead to a huge saving in the government's pension costs.

"Pensions linked to CPI will be lower over a period of time - some estimates put the drop as high as 25%", said Dawid Konotey-Ahulu of Mallow Street.

The government's powers over private sector occupational schemes are limited as these are governed by their own rules, which in many cases have links to RPI "hard-wired" into them.

The Pension Protection Fund (PPF) has calculated that the UK's private sector company pension schemes moved back into surplus in July.

It says the 6,653 schemes it measured were in surplus to the tune of £7bn, a turnaround from their £22bn deficit at the end of June.

This was similar to their position two years ago but far better than that recorded in July last year when there was a deficit of £109bn.

Greengates Builders Merchants thinks the rise in funds in private pension schemes is good news but the link to CPI a worry.

 

Greengates Builders Merchants delivering to the whole of Lancashire including: Accrington, Blackburn, Burnley, Clitheroe, Darwen, Great Harwood, Haslingden, Padiham and Pendle.