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The Actuary The magazine of the Institute & Faculty of Actuaries

Private pension scheme CPI/RPI rules to remain intact

The Government has confirmed that it will not introduce legislation to override pension scheme indexation rules.

Responding to a consultation on the impact of using the consumer prices index (CPI) for private sector occupational pension schemes, pensions minister Steve Webb said: "We want people to have confidence and trust in their pensions. We have set CPI as the statutory minimum, but many schemes can and will pay more, and we will not give schemes power to change their rules."

"We also know that many schemes now find that their funding position is more secure as a result of the change to CPI and this move in the long term will help make defined benefit schemes more sustainable."

Research by the Department for Work and Pensions found that the majority of RPI-based schemes that had the potential to switch said they wouldn’t make the move to CPI.

The Government says that it has also listened to concerns raised in response to the consultation and is looking at legislating to ensure CPI doesn’t act as an underpin for schemes using RPI to calculate revaluation of deferred pensions as well as increases to pensions in payment.

Mr Webb said: "We don’t want to disincentivise schemes who wish to continue with RPI increases, which is why we will be looking to remove the CPI underpin for revaluation of deferred pensions, keeping things simple for business."

The full consultation response is available here.