Breaking news: occupational pensions now to be linked to CPI
Pensions Minister Steve Webb has announced in a written ministerial statement (that I’ve not yet found online) that the government will in future use CPI indexation for occupational pensions and pensions paid by the PPF and FAS.
While occupational pensions are free to set their own increases they must meet a minimum increase in line with the cost of living up to a maximum of 2.5 per cent. This is known as Limited Price Indexing.
The law does not say which index should be used but requires the Secretary to say each year what the inflation rate will be. In the past this has been the RPI. In future the CPI will be used.
In the budget this change was announced for public sector pensions. Now private sector pensions have been levelled down to this too. We’ve already looked at what this means for public sector pensions.