Inflation link to change for private sector pensions
Date: 9 July 2010
The government has proposed changing the way that increases are applied to private sector pensions.
This means millions of people would be likely
to receive lower increases to their pensions.
At the moment, pensions are linked to rises in
the Retail Price Index – a measure of price inflation which tracks
the rise in the price of a typical basket of consumer goods and the
rise in housing costs.
The government plans to change the measure of
inflation that they use for the purposes of increasing state
pensions and public sector pensions from RPI to the Consumer Price
Index instead – and they want to extend this to include private
sector pensions too.
The CPI is different to RPI in that it doesn’t
include the rise in housing costs and is also worked out
Pension experts predict that because of the
different way that CPI is calculated, future pension increases will
be an average 0.5% lower every year.