Inflation Measurement In Pension Schemes
Our opposition to the use of Consumer Price Index (CPI) in calculating pension increases
Unite is strongly opposed to the application of CPI for the purpose of pension increases and believes RPI linkage should be maintained. CPI has been selected not because it is a better index but because it is a lower index. We believe that rather than being more appropriate for measuring pensioners’ cost of living its methodology means it is actually less appropriate.
Unite welcomes the extension of the requirement for employers to consult on pension changes to cover changes in the basis of pension increases, as these are a key factor determining the value of the benefit. The inter-action of CPI with caps on pension increases will serve to compound the damaging effects in the company defined benefit scheme context
Unite strongly supports the proposals not to impose CPI through over-riding legislation or to allow modification orders as would allow schemes to by-pass the established restrictions on reducing accrued benefits. Any reduction in accrued rights would offend against the key principle of changes not reducing benefits retrospectively, which is fundamental to protecting members’ rights to benefit and maintaining member confidence in schemes.
Read the full consultation response below.