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Government cuts private pensions

Robert Peston | 16:39 UK time, Thursday, 8 July 2010

It will matter to millions of current and future pensioners that the government is taking steps to uprate what they receive from private occupational schemes by consumer price inflation (CPI), rather than retail price inflation (RPI).

MoneyHow much will it matter?

Well, in theory quite a lot, because the RPI has risen rather more than the CPI since the CPI began to be calculated some 22 years ago.

If a person starts drawing a pension at 60 and lives till they're 82 - which is not unrealistic on the basis of current mortality rates - that person would be receiving 16% less cash in the weeks before they died under CPI up-rating (on the assumption that CPI and RPI diverge over the next 22 years in the way they did over the past 22 years).

Which is a serious sum of money when expressed in that way - and for those on low pensions, could be the difference between hardship and comfort.

As for pension funds that are in deficit, that 16% fall in what they'd pay out to each pensioner would be seen as a welcome fall in their overall liabilities - though probably not enough to transform a sick pension fund, such as the Royal Mail's with its £10bn deficit, into a healthy one.

Comments

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  • Comment number 1.

    Surely this is nonsense. If it appears that there will be higher payouts in the future then the companies will have to pay out less at the start of a pension or else they will run out of funds quicker!

  • Comment number 2.

    Robert:

    I am surprised with the revelation of the U.K. Government cuts in private pensions to protect them....

    (d)

  • Comment number 3.

    I may have phrased that rather badly..... what I am getting at is that we never really know what the future will be like and what returns are likely.
    In the budget wasn't there a mention of changing most benefits and state pensions onto CPI too?

  • Comment number 4.

    Good government plan. If you make life hard enough for pensioners then they probably will not live as long, thus saving even more money for hard pressed pension funds.

  • Comment number 5.

    If you believe RPI will always exceed CPI, the govt are effectively proposing to allow pension schemes to reduce the value of members' accrued benefits, not just future ones. That's serious stuff, as such changes have never been permitted before.

    In theory, CPI is a better measure for pensioners than RPI, since it strips out mortgage costs which most/all pensioners face. However, why is RPI-x (ie mortgage costs taken out) consistently higher than CPI (on average about 0.5% pa over the last 10 years if I read the national statistics right). Therefore is CPI a Govt. fudge?

  • Comment number 6.

    But isn't the reason why RPI has been greater than CPI over the past couple of decades because CPI doesn't take into account house prices, which have risen ridiculously over that period?

    So if house prices fall back to a more affordable level (which they will have to eventually), then CPI will actually be greater than RPI over the forthcoming period.

    So maybe the Government is actually boosting the future value of pensions?

  • Comment number 7.

    This doesn't sound like a very good idea to me, surely we should be paying the people who fought for our country - not penny-pinching from them!

    And what happens when the current 20 something's reach pension age? There will be mass poverty in the UK!

  • Comment number 8.

    Just what has a private contract between me and an independant company got to do with the Current government.
    Oh I forgot they are mates with the finace industry who have spent the last 20 years robbing our pension savings, with profits only for bankers and not their clients, now these are running out they want to take the rest.

  • Comment number 9.

    Surely, they should be forcing Private Companies to make decent Pension provision for their Workers (as they used to), rather than destroying the Public Sector Pensions.

    Ah, but Thatcher and her disciples allowed Companies to have Contribution holidays, put their Pension contributions down as extra Profit to pay bonuses out of, and so forth.

    And, the Wall Street Investment Bankers, Hedge funds folk, shortsellers etc have further slaughtered the value of Private Pension Funds by destroying companies (such as Bradford and Bingley and others) in which Pension Funds ahd invested.

    Not to mention the Fees these Funds pay. Oh, and the dodgy American Mortgage backed Bonds the Pension Funds have bought !

    The Gov't should regulate the Private Pension sector as fiercely as they used to, limiting what Pension Funds can be invested in as well.

    Oh of course, Pension Funds have also bought into Commercial Property.
    And , outside of a few areas, Commercial property is bad news, lots of empty Offices, empty shops, reduced Rent deals etc.

    Our whole economy is designed to function with a certain amount of annual wage inflation, take that out of the equation, and everything starts to break down.

    Anyhow, I have about forty seven different Zombie concepts to review....

    Am I pulling your leg, or not?

  • Comment number 10.

    Pension? What pension? Work till you drop.

  • Comment number 11.

    A rip off by any other name....

    Just so some funded public sector bodies appear to have less of a liability!

    A fraud on the public!

  • Comment number 12.

    I don't know a huge amount about pensions, so did I miss something? Why is the government sticking its nose into private pension schemes? What does it have to do with them?

  • Comment number 13.

    This really is nonsense. The CPI does not represent true inflation for most people. I am a pensioner with 2 small private pensions, and, using the BBC website's Personal Inflation Calculator, even when CPI was showing 1-2% inflation, my personal inflation rate was in excess of 5%. Taking into account that I do not smoke, drink, or have exotic foreign holidays, but do run a car for approx 12,000 miles a year, own my own home, and do not spend a lot on dining out, my personal inflation rate is much higher than normal. Why should I therefore take a cut in my annual increase? It is about time that government employees learnt the basics of life and accepted that their pensions are too generous - don't mess with private pensions that we private-sector employees and our employers have contributed to for years. The reasons for the apparent deficit in private pensions is because the authorities keep changing the rules. Back in the 1990s, my employer was told that its pension fund was "over-subscribed" and was more or less told to take a "pension contribution holiday" or be taxed on the excess. Then the rules were changed, and all of a sudden, my employer's pension fund was in deficit. Then Gordon Brown came along.............

  • Comment number 14.

    IT IS ROBBERY.

    THE RULES ARE THE RULES OF WHICH MILLIONS HAVE PAID INTO.

    This is basically ROBBING pensioners of around £100 BILLION, on top of other major cuts to services and increased VAT.

    This government has said again and again that in ALL this financial mess pensioners will be protected and looked after. This change, is FACTUAL EVIDENCE that those statements by government are a COMPLETE and PRENTIOUS LIE.

  • Comment number 15.

    Is it little wonder that so many people now fail to provide themselves with even a basic pension.

    If the value of your pensions investment is so easily de-valued by outrageous and attrocious banking negligence and fraudulent credit rating agencies, then along comes government and chops off a further £100 billion, then whats the point.

    There is LESS and LESS incentive to save for old age, I should think that more and more people will probably be thinking more about visiting Holland and ending it all.

  • Comment number 16.

    Well for those who are facing unemployment or low wages this move has already been decided.

    Did those who sat there thinking they had someone else to blame, someone else to suffer really think this government would be so kind to those who over the past few decades have been lucky enough to work and earn enough for a private pension?

    People need to understand this austerity is them and us. But us doesn't mean the voting public, it means the super-rich Sir Greedies! Them is all of us, the guy driving the bus, the nurse, the teacher, the street-sweeper, the builder, the IT worker, the sick, the firemen.....

  • Comment number 17.

    Gee Robert - when you put "private sector pensions" in your headline I thought you meant the pensions of the likes of Fred Goodwin and Stuart Rose! But no. It's just the plebs that are going to get cuffed again, isn't it?

  • Comment number 18.

    Unfortunately all the research I have done myself in this area points to these measures as necessary, though I was surprised that the new government took the bull by the horns so decisively.
    I was also hpoing to be reading Robert Peston's latest book "The New Capitalism" today but find its publication has been cancelled and wondered why?

  • Comment number 19.

    Surely private pensions have rules which are, in effect, a contract between the scheme and their members. Clearly any scheme can change their rules but only subject to ratification by the trustees after consultation with members. How can the government instruct them how to pay out their pensions?

    If this does go ahead and affects scheme members who are already retired, this is unfair as they retired on a set of assumptions for future increases, agreed with their pension scheme. Yet it would be equally unfair if some pensioners receive increases based on RPI, and others, who retire once this is brought in, receive oncreases based on CPI.

  • Comment number 20.

    I was amazed that the government want to reduce the income of pensioners who have paid into private contracts that are indexed on RPI and a law that they will come out with that changes it to CPI. It is a disgrace and what is more i really think it should be illegal. This must be a desperate act to line the pockets of companies.

  • Comment number 21.

    These, of course, were governmental promises and everyone knows what they are worth. Banking bonuses would probably cover the difference but we wouldn't want to hold those who caused the problems accountable. Could give the bad paper back to the banks and that would resolve most of the matter, but the working man is used to suffering and the wealthy are not so we wouldn't want to change what is viewed at the top as the "natural order" of things. Sacrilegious, you know.

  • Comment number 22.

    Ho Ho Ho......As a young lad I seen the "Put money aside for your 'future', but you can never touch it for what it was'

    A SCAM!!!

  • Comment number 23.

    When I purchased my pension I entered into a legal agreement with my pension provider that it would be increased by RPI each year. I could have opted for a nil increase or a lesser % increase and obtained a higher initial pension payment. Who are the Government to now interfere with this private agreement. If the pension funds are stuggling to meet their liablities then like any other business with debts they need to put more of their annual profits into the pension funds and pay less in shareholders dividends. This is what the Government should be enforcing on the pension funds. It is the honest and moral solution.

  • Comment number 24.

    A friend of mine, who worked for Hill Samuel years ago, left the selling pensions business simply because he didn't believe in it. It made him some money but he didn't stay long enough to get rich by it.
    After the Maxwell affair (and that was some time ago) I decided OUT from Britain. It simply is Ali Baba and his forty thieves. That's just about what's running everything to do with infrastructure, through social services to the finance and industry sectors.
    At 64, in being OUT from Britain for only 12 years, I've brought myself up to a better position for my retirement and health. I plan to throw away the passport (and British citizenship) too, its just as useless, because UK passports now fail (yes, FAIL!) to state the issuing office it wouldn't even let me open a post office savings account here in Germany without the counter assistant resolving the issue with a short 2-3 minute phone-call. Cameron and his fogies will stink just as much as those gone before him when they DICTATE DICTATE DICTATE over peoples private pensions! These will already be subject to the vagaries of the performance of the finance sector following new (and needed) regulation. What a total joke!

  • Comment number 25.

    I fail to understand how accrued pension provision that has been built up under terms and conditions agreeed between an employer and an employee can be changed by either the government or anyone else. For those that agree to such an imposition, I suggest we take a look at their income over the past 10 years and then demand additional taxation from them.

  • Comment number 26.

    I have been an Occupational Pension Scheme Trustee in the private sector for over 20 years and in that time thought I had seen everything but today takes the biscuit ... it beggars belief that a Conservative led Government has stated its intention to introduce legislation which will enable employers to retrospectively devalue the pension rights accrued by millions of workers and retired people who have done PRECISELY what every predecessor Conservative Party have asked them to do - make provision for their old age !

    .. and it is important that the Government realise what their actions will mean ... they have (perhaps knowingly) signalled to the current and next generation of workers that it is totally pointless joining a pension scheme as whatever retirement benefits you may have accrued can be snapped away at a moments notice and without warning ....

    In the late 1980s Mrs Thatcher did her level best to kill off one of the last bastions of worker collectivism - Occupational Pension Schemes and when elected in 1997 Gordon Brown was not much help in protecting the schemes that had survived Thatcher and Major but NOW Messrs Cameron and Clegg have taken a giant leap across the rubicon of pension law ...

    It is a very sad day ... I hope at some stage ordinary folk wake up to what is going on ....

  • Comment number 27.

    If this was implemented this would be a serious infringement of individual liberty.

    If there is no private contract between people then we have the corporate state - fascism.

    In a land where there is no private property there is no freedom.

  • Comment number 28.

    What makes people think that a contract for a private sector pension should be more legally binding than for those with a public sector pension. If the government can ride roughshod over the nurses and teachers, why should you think they won't do so with your hard working engineer or bank clerk. After all they can use the same unsustainable argument, they will say if a pension fund has a huge deficit like many have it proves that this change is desperately needed.

    I just hope it hits home now how unfair decisions like this are, whether you work in the private or public sector, by moving the goal posts for those of us whom it's too late to make alternate provisions or career choices it's northing short of scandalous.

    The new coalition government successfully painted a picture of 'golden hand shakes', 'lavish pensions' and 'six figure salaries' being the norm for public sector when the reality is nothing like for the vast majority. However all those people who fell for it and cried foul are caught now somewhere between a rock and a hard place, because it's going to make you look a bit hypocritical complaining about your own 'golden handshakes'. After all they will tell you we are all in this together.

    The real kick in the teeth for me is that hard working low and middle income groups as always will be the hardest hit. The wealthy will barely bat an eye lid and the scroungers and work shy who have never done a days work will get bailed out by the state despite never having payed in. They may not get a pension but will get income support or the likes leaving them no worse off than many of those whom were sensible and provided for themselves in their old age.

    Where is the incentive to provide for yourself in your old age when the government constantly penalises those of us that do.

  • Comment number 29.

    The move looks pretty criminal to me. It makes a joke of a pension system even more inadequate. In this country you can either be an investment banker on a (ultimately) publicly funded mega-bonus or die at 65.

  • Comment number 30.

    CPI does not include Council tax - which is rising by more than RPI let alone CPI.

    The State pension is to be indexed to the greater of earnings, RPI and CPI because RPI was thought NOT GOOD ENOUGH for it. But apparently RPI is TOO GOOD for private pensions.

    Pensions in deferment or paid early will have even longer to lose their value under this arrange. I was made redundant at 50 and given my (smallish) pension immediately. I could draw it for 35 or 40 years and a 1% loss per year is simply daylight robbery.

    All this just to make the balance sheets look better so that the CEOs can get a bigger bonus.

    This measure should affect future accurals only. It should especially not apply to pensions in deferrment or paid before normal retirement age. In any case RPI-X is a fairer measure to exclude mortgage costs.

    THIS IS A GIANT RIP OFF IN FAVOUR OF CORPORATE FAT CATS. Write to your MP now. This further widens the gaps between large public sector pensions and small private sector pensions.

  • Comment number 31.

    What an absolute disgrace.

    What on earth has private pension schemes got to do with the government? Do they not understand the word Private.

    If you have a contractual agreement with a second party it is only subject to change by the agreement of those parties. The government is not a party to any PRIVATE agreement. Public pensions yes because it is tied with tax payers money, but private pensions are funded by the members and funds invested by trustees in various investtment markets juist like shares in a business. Nothing to do with the Goverment.

    KEEP YOUR THEIVING NOSES OUT!

  • Comment number 32.

    28. At 8:33pm on 08 Jul 2010, tafer2uk wrote:
    "What makes people think that a contract for a private sector pension should be more legally binding than for those with a public sector pension."

    Because in the latter case the government is the employer. Terms of employment do change in the private sector but this is a matter between the employer and the employee. The concept of private property and contact are crucial to the fundamentals of a free society.

    If you do not think it is important what about the following example.

    You see a private car advertised on the internet and go and see it. The owner of the car agrees to sell the car to you for £10k. You pay the money and drive the car home. The "office of just and fair trading" send a bureaucrat from the government to your house and tell you that in their opinion the car was worth £12k and you should pay over an extra £2k to the seller.

    An extreme example? This is where the path of government interference in private contract leads. You have been warned.

    Just because many public sector workers are feeling justifiably worried about their jobs and terms and conditions, that is no justification for lashing out at the private sector and trying to justify the erosion of freedom and liberty, just because your employer lied to you about what they were going to provide for you.

    Time for a written constitution to limit the power of government.

  • Comment number 33.

    Theft is theft. It makes no difference whether it is from a public services pensioner, or a private pension. We all knew that this government would have to make unpopular decisions, but this! It is an act that suggests that those in charge not only lack moral judgement but are willing to fly in the face of justice. It smacks of incompetance will bring much resentment and is a sure way to loose respect.

  • Comment number 34.

    Does this throw up a legal question ?
    If a person is already in receipt of a pension where it is stated in the rule book it will increase by the RPI, is that not a contractual situation where the Scheme has agreed to supply a pension and the recipient agreed to take the pension on that basis ?
    Does the government have the right to change that arrangement ?

    Mmmm ?
    We appear to be getting an outbreak of obsessive compulsion in government with regard to cutting back on everything.
    P.S. Was this in any manifesto ?

  • Comment number 35.

    I have heard it all now - we got used to Bliar as a suitable & appropriate nickname: what's the right one for Cameron & Co.. I have really had enough now...!!!

  • Comment number 36.

    Has anyone heard if the story I'm reading at the e-forex.net site?

    Barbara Ann Radnofsky (Attorney General candidate in Texas for the democratic pary, no less) is taking Goldman Sachs to court under RICO laws - anti-racketeering laws first brought in to deal with the mob!

    Her own website gives the details.

    Now do we have anything like a RICO law here?

  • Comment number 37.


    Yep!

    Just as I predicted in my post last week. After the finance industry aided and abetted by HM government has fleeced millions of Public Sector workers out of millions of pounds from their pension pots, the good old Private Sector pension providers now want to jump on the bandwagon and link benefits to CPI rather than RPI. (RPI - 5.2% CPI - 3.5%) This means that we all lose 16%-18% of future benefits which we all thought we had signed up to receive when we retire. Where has the money gone? Just check your pension providers Board of Directors remuneration packages and you'll see where. That's wht they are all driving around in big Jaguars and we are all struggling to keep our 10 year old Ford Mondeo's on the road.

    When are the good people of this country going to wake up to the finance industry, pensions in particular, and tell them to take a hike? Pensions are a SCAM and only exist to put £ millions of workers hard earned cash into the hands of a few greedy spivs and their chums. aka Boards of Directors, NED's etc.

    We all signed a contract with these so-called professional financiers and they should be made to stick to it (like the fallen bankers moaned - "we have a contract"). They got theirs, so we must get ours.

    If the pension industry cannot guarantee it's end product we are all just as well forgetting about pensions altogether.

    I for one have already started.

  • Comment number 38.

    MR PESTON - you had better dig in to this bloke Steve Web, because what I have read on this and other forums in the space of about an hour is absolute loathing for this disgrace of a theft from peoples private long term agreements and investments. This is not taxpayers money it is ordinary peoples private investments.

    This plan is nothing short of theft and Cameron should sack this bloke immediatly for devising a criminal theft.

  • Comment number 39.

    There are several comments saying this is unfair, eg

    "I fail to understand how accrued pension provision that has been built up under terms and conditions agreeed between an employer and an employee can be changed by either the government or anyone else."

    Did you all complain when they announced changing (devaluing) the public sector pensions the same way in this budget?
    Most of our pensions are below £10,000, some around £4,000 - we were not all private sector people brought in on larger salaries.

  • Comment number 40.

    32. At 9:04pm on 08 Jul 2010, truths33k3r wrote:
    28. At 8:33pm on 08 Jul 2010, tafer2uk wrote:
    "What makes people think that a contract for a private sector pension should be more legally binding than for those with a public sector pension."

    Because in the latter case the government is the employer. Terms of employment do change in the private sector but this is a matter between the employer and the employee. The concept of private property and contact are crucial to the fundamentals of a free society.

    If you do not think it is important what about the following example.

    You see a private car advertised on the internet and go and see it. The owner of the car agrees to sell the car to you for £10k. You pay the money and drive the car home. The "office of just and fair trading" send a bureaucrat from the government to your house and tell you that in their opinion the car was worth £12k and you should pay over an extra £2k to the seller.

    An extreme example? This is where the path of government interference in private contract leads. You have been warned.

    Just because many public sector workers are feeling justifiably worried about their jobs and terms and conditions, that is no justification for lashing out at the private sector and trying to justify the erosion of freedom and liberty, just because your employer lied to you about what they were going to provide for you.

    Time for a written constitution to limit the power of government.

    ----------------------------------------------

    You're missing the point the poster you're replying to is making. He's not lashing out at private sector employees - he's pointing out that if the Government can get away with treating its own employees like dirt and reneging on the contractual agreements they entered into with them, they'll think nothing of arranging things so that private sector employees are treated the same way.

    But I understand your reading of this comment. The Government has cynically vilified its own workers and egged on private sector workers to see them as living cushy lives rounded off with "gold-plated" pensions. And it has done so with the sole intention of setting one group of working people against another in the hope that we will forget that the real cause of our financial predicament are the vastly well-paid elite whose yachts and pension pots have never for one moment been threatened.

    Private sector or public sector - it doesn't matter. We're all just plebs in their eyes. We'll get what's left when the wealthy have been protected. That's what's meant by "what the country can afford".

  • Comment number 41.

    32. At 9:04pm on 08 Jul 2010, truths33k3r wrote:
    Time for a written constitution to limit the power of government.

    It's ok spouting ideology, however not when it's selective. What about government interference in the shape of bailing out the banks, by your logic we should have let them all go under as it shouldn't interfere with contracts between private individuals and organisations.

  • Comment number 42.

    At 9:50pm on 08 Jul 2010, Andrew Morton wrote:
    You're missing the point the poster you're replying to is making. He's not lashing out at private sector employees - he's pointing out that if the Government can get away with treating its own employees like dirt and reneging on the contractual agreements they entered into with them, they'll think nothing of arranging things so that private sector employees are treated the same way.

    But I understand your reading of this comment. The Government has cynically vilified its own workers and egged on private sector workers to see them as living cushy lives rounded off with "gold-plated" pensions. And it has done so with the sole intention of setting one group of working people against another in the hope that we will forget that the real cause of our financial predicament are the vastly well-paid elite whose yachts and pension pots have never for one moment been threatened.

    Private sector or public sector - it doesn't matter. We're all just plebs in their eyes. We'll get what's left when the wealthy have been protected. That's what's meant by "what the country can afford".
    ------------------------------------------------------------------------

    Thanks, I most certainly wasn't attacking the private sector. And I genuinely hope anyone with a private pension gets what they signed up for.

  • Comment number 43.

    Do we hear anything from the lib dems about this scandalous announcement? The sooner the North splits from those arrogant robber barons in London the better! Do we get any benefit from them? They've killed our industries, sold our water, hocked our public transport and now they're robbing our pensions. To the Barricades!!!!

  • Comment number 44.

    As far as I can tell (and I may be wrong) this only applies to pension funds that are included in the Pension Protection Fund.

    'The Pension Protection Fund was established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.'

    These are pensions that have been bailed out by the public sector and it appears that the government want to bring these (once private) pensioners into line with all of the suffering public sector pensioners.

    If you have one of these pensions then to all intents and purposes, without government support it would have been toast (including all the T&Cs) so they feel that they have the right to interfere.

    I think that if your private pension fund is ok and does not fall under the pension protection fund then your T&Cs will stand and the government has no intention of messing about with it. (other than raiding any surplus and changing the tax system to their advantage like all governments)

  • Comment number 45.

    40. At 9:50pm on 08 Jul 2010, Andrew Morton

    I am not missing his point at all - I read it very carefully. He is not attacking private sector pensions, he is suggesting that there is no difference between the government amending the terms and conditions of their employees and the government interfering in and agreement between a private employer and that employer's employees.

    The situation is totally different and a affront to personal liberty.

  • Comment number 46.

    I wonder if the Government are now going to legislate that debts we may owe because they are changing rules we thought fixed i.e. RPI vs. CPI will they instruct credit companies to write the balance off in our favor.

    It makes me wonder will they decide that all the money home owners have paid for the houses maybe the state should say no they belong to us now and you will have to pay rent.

    This has all really happened because the Government decided not to save for public sector pensions and pay it from present tax revenues why are we all being charges extra for successive Government failures.

    It is a scandal a disgrace and i think illegal remember they also want to increase our retirement age at a loss of thousands of pounds as well

  • Comment number 47.

    41. At 9:56pm on 08 Jul 2010, tafer2uk wrote:
    32. At 9:04pm on 08 Jul 2010, truths33k3r wrote:
    Time for a written constitution to limit the power of government.

    "It's ok spouting ideology, however not when it's selective. What about government interference in the shape of bailing out the banks, by your logic we should have let them all go under as it shouldn't interfere with contracts between private individuals and organisations. "

    Yes they should have gone into bankruptcy. Only the wealthy were protected by the bailouts at the expense of the poor.

  • Comment number 48.

    The Government (well Parliament anyway) makes the Law Of the Land. We are indeed all in this together (unless you are in the ultra rich category. A bit of Primary Legislation here (superannuation act 72) a change there and voilà - peoples earned rights are wiped out. I hope all you folks that voted for these viscous greedy toffs are feeling suitably chastened.

    This is class warfare. Every economic decision Osbourne and Cameron make benefits financiers, stockholders and the moneyed class at the expense of workers and ordinairy people.

    We are in this together. Act acordingly. Show solidarity with public sector workers. Demonstrate peacefully when we get a chance. Lobby your liberal democrat MPs to disolve the Coalition

  • Comment number 49.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 50.

    PS. Don't be surprised about this. The government did this to all public sector workers (linking pensions to CPI instead of RPI) as part if the Emergency Budget and announced on Monday that it would use primary legislation to radically decrease the value of protected existing compensation rights for civil servants. This was despite a Judge ruling that the scheme couldn't be altered.

  • Comment number 51.

    Truth33krs. You are missing the point. For public sector workers the goverment was the employer but even then under UK employment law it cannot alter previously agreed terms. So as they are proposing for private sector peolw. , it cheats and uses legilsation to chNge the laws it doesn't like.

  • Comment number 52.

    The time is coming to stop the useless posting and whinging.

  • Comment number 53.

    44 Bob Rocket - If it only applies to government protected schemes then these are not strictly private pensions, as they have been bailed out, therefore the headlines are misleading and (maybe deliberately) inflammatory.

    Zombie schemes.

  • Comment number 54.

    The average private company pension is about half the average public sector pension. So equalising the indexation rates will not remove the massive gap between the public and private sector.

    This only benefits the corporate fat cats, it does not benefit the taxpayer at all. The pension protection fund is also privately funded by a levy on all schemes.

    It is gross interference is private company arrangements. Above all else it should not overide company pension fund rules even if the minimum legal obligation is reduce from RPI to CPI.

    It especially should not be applied to deferred (or early) pensions otherwise they could lose 20% of their value before starting to be paid from normal retirement age (and another 30% after that).

    I paid in AVCs to get extra pension and chose not to take a tax free lump sum. The pension fund accepted my money in return for an RPI linked pension. I cannot accept that the Government should overturn that contract at a time when even the RPI does not keep up with the actual costs.

    RPI-X (RPI minus mortgage costs) would be a much fairer index to use.

  • Comment number 55.

    Standards of living will fall because of this and sadly that is essential if we are to repay Labour’s debts and move forward to more realistic future expectations in line with our poorer levels of global competitiveness. The alternative is we end up paying out more pay and pensions than we generate requiring us all to learn Greek!

    It also means interest rate rises will have more effect on inflation damping as CPI pay and pensions will no longer rise with interest rates as RPI linked pay and pensions have in the past, so the interest rate lever will work better than it has recently. No bad thing.

    Lastly, it is a practical way of dealing with us baby boomers whose pensions are simply not going to be met by the next generation. Annoying but we had all better get used it folks...

  • Comment number 56.

    Surely this move would directly conflict with the logic of uprating state pensions in line with earnings rather than prices. My understanding is that rpi includes council tax as one of its components and is therefore more relevant to pensioners than cpi which does not. My hope is that this proposal is rapidly discredited and withdrawn forthwith. Saving money by reducing the amount a pensioner can receive in pension rises is no way to proceed in a civilised society.

  • Comment number 57.

    In the industry I work in I haven't had any choice but to have a "defined contributions" pension scheme for the past fifteen years or so (no final salary pension for me). Despite my company putting in fairly generous contibutions, the money in the scheme still isn't worth much, and I'm not expecting to get a lot out of it when I retire.

    The pensions industry is little more than a fraud. Hedge funds and others don't actually make money out of nowhere - the money is disappearing from somewhere else (guess where?). Personally I'd prefer it if the Government got rid of *all* the tax relief etc on pensions/ISAs/everything, used the savings to increase the State Pension, and I'd just save what I can in a mutual building society like my grandparents used to.

    All the complexity in the tax system is just there to benefit the rich. Get rid of it.

  • Comment number 58.

    I have several private pensions, and they all buy less because of inflation. There is no indexation, whether it is to CPI, RPI or any other index the government invents. The same is true of my savings, which will be taxed even more by an increase in VAT next year. So, would I encourage anyone to save for a pension or save in any way at all?

  • Comment number 59.

    It seems the aim of this proposal is to prop up existing schemes - like most ill-thought knee jerk reactions it is likely that most people will take the considered view of 'why bother when the rules can just be changed by government decree' and save for their pensions elsewhere.

    So much for Cameron's much shouted about 'new form of government' - and I think its about time that the Lib Dem MP's take a hard look at themselves, stop spouting about 'what else could we do?', and start standing up for the people. To do otherwise will mean their certain political extinction, as at the moment we might as well have a Conservative government with a majority of 200, for all the use they are to us at the moment.

    All we are seeing is Conservative proposal after proposal nodded through by the Lib Dem lapdogs, with the booby prize (not guaranteed once the Conservative press get their hands on the issue) of proportional representation keeping them under heel. Cameron and the bankers really must be amazed how easy this coalition lark is to them.

  • Comment number 60.

    55. At 10:38pm on 08 Jul 2010, Paul J Weighell wrote:
    Standards of living will fall because of this and sadly that is essential if we are to repay Labour’s debts and move forward to more realistic future expectations in line with our poorer levels of global competitiveness


    Just like that kid on BBC Question Time who will have to find 10% rent from a reduced unemployment benefite - can't get a job, can't get a place in HE or FE and not one single politician had the decency to answer with anything other than 'we are all living beyond our means and we all have to make sacrifices'

    So for the sake of the financial markets we are going to chuck the young, the unemployed out onto the streets (up here, people die in the winter because the cold is severe) and we'll reduce the ability of pensioners to stay warm, to feed themselves, so they'll get that old favourite of hypothermia. We're creating poor people to pay for the rich, and those people will not survive.

    People who were encouraged to buy private pensions will suffer. People who thought they were doing at least alright if not better and were preparing for their futures will suffer. And those encouraged to buy pensions when they really couldn't afford them will be hit harder yet again.

    This is yet another example of having the ordinary people pay for the casinos allowed to run wild in a frenzy pay for it all.

    Disgusting isn't the word.

  • Comment number 61.

    The answer to the majority of the aforementioned problems is simplicity in itself.

    Everyone suspends payments into their weekly/monthly pension plan, like I just have. It's time to start turning the tables a little...

  • Comment number 62.

    #53 truths33k3r

    from the Purple Book (which is on the link at #44)

    'Scheme memberships for the Purple 2009 sample totalled 12.4 million'

    I assume that this means current pensioners or potential pensioners so the headline

    'Government cuts private pensions'

    and the strapline

    'It will matter to millions of current and future pensioners that the government is taking steps to uprate what they receive from private occupational schemes by consumer price inflation (CPI), rather than retail price inflation (RPI).'

    is strictly correct.

    RP was a little disingenius in not making it clear but given the uproar it has caused it has certainly got people thinking and talking about pensions, both public sector and private, how they are funded and the role of government.

  • Comment number 63.

    I recall questioning the 'robustness' of final salary occupational pensions - how 'safe' they were for employees - and realising that only those with pensions in payment (i.e. who had already retired) were well protected. The trustees were constrained to have the retired members' share of the assets in secure things like gilts. This left the employees with the riskier investments (risk = growth). Also accrued benefits were designed to be held in trust and thus also protected - provided that the scheme was not in deficit. Protection against the employer going bust (and thus unable to make up the deficit) was wholly ineffective.

    Changing employer usually meant that (i) transferring from one scheme to another was significantly disadvantageous and (ii) freezing the earlier contributions meant that you tied that bit of your pension to a mid-career salary rather than a final (higher) salary.

    Tinkering with pension scheme rules at that time attracted little attention but I predicted that in a few years time it would probably become a much more likely source of industrial dispute.

    Suddenly we see that already accrued benefits are under fire - previously such retroactive legislation was seen as unwise.

    Where does this end? If making provision for your old age - an inflation-linked occupational pension plus a non-means-tested old age pension that also increases with inflation - can be retrospectively devalued then it is a clear message to the lower paid. If you are not likely to accumulate a pension pot of over £150000 (pension of £6000 p.a.) then you should make NO PROVISION at all. Any provision you make that is less than this simply offsets mean tested benefits you would otherwise receive.

  • Comment number 64.

    59. At 11:06pm on 08 Jul 2010, balbs wrote:
    It seems the aim of this proposal is to prop up existing schemes - like most ill-thought knee jerk reactions it is likely that most people will take the considered view of 'why bother when the rules can just be changed by government decree' and save for their pensions elsewhere.

    So much for Cameron's much shouted about 'new form of government' - and I think its about time that the Lib Dem MP's take a hard look at themselves, stop spouting about 'what else could we do?', and start standing up for the people. To do otherwise will mean their certain political extinction, as at the moment we might as well have a Conservative government with a majority of 200, for all the use they are to us at the moment.

    -----------------------------------------

    Don't hold your breath. I've just watched Michael Moore, LibDem Secretary of State for Scotland, on Question Time reply to a teenager facing homelessness and unemployment as a result of the cuts, clearly scared out of his wits at the prospects for the future. Moore's reply "Well, we're all in a mess. We all have to make a contribution".

    God knows I've been disappointed and angry with politicians before, but I can't remember being quite so disgusted in a long long time.

  • Comment number 65.

    53

    The statement seems clear enough. This applies both to private occupational ( final salary ) schemes both current and deferred and to the safety net schemes. The effect, as KPMG has noted, is to reduce future fund liabilities by £50-100B, a figure that must be taken across the whole industry. For context the total deficit across FTSE100 companies is around £60B.

    This is a most peculiar Government intervention in that it penalises private sector employees. This has no impact on the public sector deficit.

    It seems more perverse when the state pension is to be increased by the higher of earnings, CPI or 2.5%. A measure that commits the Government to increases in the tax funded State pension that must be unsustainable over the long run, unless the pension age rises quickly to, perhaps, 70.

    With the state pensionable age rising, the obligation to retire being removed and company pension values being eroded by this measure the real liabilities of the company funds may well be rather smaller than the current actuarial valuations.

    I wonder whether we might not be reading again of pension holidays and company profit figures being artificially inflated in a few years time.

  • Comment number 66.

    54. At 10:33pm on 08 Jul 2010, James Dowling wrote:
    The average private company pension is about half the average public sector pension. So equalising the indexation rates will not remove the massive gap between the public and private sector.

    This only benefits the corporate fat cats, it does not benefit the taxpayer at all. The pension protection fund is also privately funded by a levy on all schemes.

    ------------------------------------------

    Good - folk are starting to get it! This broo-ha-ha about public sector pensions is nothing more than a feint by government to divert attention from the real issue - the vast amounts of wealth flowing into the pockets of those you accurately describe as "corporate fat cats".

    So how about folk in the private sector stop yelling "gold-plated pensions" at folk in the public sector, and folk in the public sector stop yelling "higher wages and perks" at folk in the private sector, and we all focus our attention on the people who have really caused this financial catastrophe?

  • Comment number 67.

    Private Pensions.... When is the government going to leave things alone... the country needs good leadership to get us though this expensive mess, not to create another mess for the future, such as OUR PENSION!... after all, does the government want to put people off saving for their future!.. It would help if they create a pension plan that everyone can make it a fairer based on there contributions to there future... ie. a Bond based or a tax-free saving plan higher then the present ISA!..

  • Comment number 68.

    And don't forget some of the high earners. I'm a trustee and after Gordon Brown's A -day some senior people left our plan because their "pot" was over the limit set by the GB. However that pot size was calculated on the basis of RPI and if it had been CPI they might have stayed within the limit and could have stayed within the scheme. Similarly some people went over the pot limit and paid the 55% tax rate on the excess. Again the pot size and tax liability was based on RPI. If a compulsory switch to CPI comes into force will they get a refund on their tax?

    Pensioners/ Pension Funds in European Courts for the next decade?

  • Comment number 69.

    44 According to reports of the statement

    Pensions Minister Steve Webb said in a written statement to parliament.

    "We believe, therefore, it is right to use the same index in determining increases for all occupational pensions."

    Legislation introduced in 1995 required occupational pension schemes to increase pension payments in line with RPI to a maximum of 5 percent. This has since been reduced to a maximum of 2.5 percent.

    The changes would also affect payments made by the Financial Assistance Scheme, .. and the Pension Protection Fund, Webb said."

    So, the change to CPI will be helpful to pension funds if it is below 2.5% and below RPI. In low inflation times this is very important because the choice might be 1% or 2%. In times of high inflation pension funds do well because pensioners receive small increases while employees pay more in ( devalued ) contributions and asset values and yields rise.

    To an extent it was the low inflation environment over the past decade or so that undermined final salary pension schemes. It is no problem paying out a pension based on final salary if that is being eroded by inflation at 10% a year.

  • Comment number 70.



    Re comment 44 it looks as if you are wrong. It will apply to most private sector schemes. In fact the CBI and others is asking for Goverment to ensure that it is applied as widely as possible.

    In a written ministerial statement, Mr Webb - a Liberal Democrat - said that public and private sector pensions should be aligned.

    "The government believes the CPI provides a more appropriate measure of pension recipients' inflation experiences and is also consistent with the measure of inflation used by the Bank of England,"

    "We believe, therefore, it is right to use the same index in determining increases for all occupational pensions and payments made by the Pension Protection Fund and Financial Assistance Scheme."

  • Comment number 71.

    Robert - the comments above suggest you have got a lot of people worried with this article, and possibly some of them unnecesarily.

    Perhaps you'd like to clarify whether this change affects people who have already purchased an RPI-linked annuity - surely not, as they have entered into a private contract!

    More likely it just affects those in final salary schemes where pension increases are linked to the government statutory minimum, but please clarify as there are a lot of angey and worried posts above.

  • Comment number 72.

    The only good thing about this terrible announcement is that people are beginning to see that 'we' are indeed all in this together. The last few weeks have seemed to be an exercise in dividing people one from the other. There have been the obvious lines drawn over public and private workers, those in work and those unemployed, the disabled v the well etc etc. There have been new definitions of what it means to be a 'high earner' ie, a couple with children earning £20,000 each suddenly qualify as 'rich' which is a surprise to many of them stuggling with mortgages and the like and fierce portraits drawn of the undeserving poor and 'scum of the earth'. Whoever said 'divide and conquer' was right. We have been encouraged in the blame game and already become shrill with hysteria against one group or another. The government seem intent on using confusion and fear to divide rather than unite us as a country.

  • Comment number 73.

    This change if implemented will have the biggest effect on people who have been retired early on medical grounds as they will already be starting to lose out, possibly many years before normal retiral age.

  • Comment number 74.

    When will people wake up and smell the coffee! This government like all the rest, play games, win your vote, secure power, then at the least move the goal posts and more often than not lie. Lib Dem's for example Oh we will not raise VAT, oh dear we must do that now. Same thing here, now we can stick our noses in to pensions and Strategically slice away monies hoping most jolly jacks will not notice or not work it out for themselves. My advice is simple, make your own provisions for old age, trust no one, put money under the bed even if it suits you.

  • Comment number 75.

    I suggested in a comment on an earlier article that perhaps public sector pensions should be market-matched against the best 10/20/30 private sector company pensions. The intent would be to get away from the public vs private pension provision argument that is so divisive. I had believed that the best private sector companies would remain 'honourable' and set a high bar. However, it now looks like, while sort of matching of private and public sector pensions is on the cards, private companies are being allowed to dumb-down pensions provision to help make it cheaper across the board. Very sad but I suppose not surprising.

    I don't really have an issue with a challenge to the use of RPI, but CPI seems no better - neither appear suitable for measuring appropriate growth in pensions in payment. So why not come up with a measure that is appropriate for the purpose? From comments already made it seems that most agree that house-price / mortgage costs are inappropriate for inclusion, but other factors require detailed comnsideration. For example, in Scotland there is free public transport travel for pensioners - so one might argue that including fuel inflation was also inappropriate. If an allowance for fuel inflation is included in a 'pensions growth index' then local authorities / devolved administrations should surely not provide subsided public transport, i.e. it should be one or the other.

  • Comment number 76.

    Anyone who has left (or been forced to leave) their company pension scheme before retirement age has had their deferred pension uprated by RPI each year - which is essential for it to keep it's value.

    Now - someone aged 45 with 20 years service could leave a deferred pension for 20 years before receiving it. This would devalue it due to CPI being lower than RPI even before he starts to get it, let alone afterwards.

    The CPI effect would therefore be applied for 50 years assuming he received the pension for 30 years. Truly outrageous. Not all company schemes are in deficit.

  • Comment number 77.

    I worked in the life and pensions industry (backroom, not selling) for many years and I can assure your readers, the people at the top are just sharks in suits and have very close links with politicians (in fact, there's a revolving door between politics and the business at board level).

  • Comment number 78.

    Gorden Brown by any other name,how were we conned to pay into private pensions,afraid that Mr.Peter Hitchens for one got the analysis of this new Government correct.

  • Comment number 79.

    This is just the start of an assault on the assets of the middle class baby boomers (births 1945 to 1965). There is certainly more to come. Pensions have been an easy target. They will now be after the rest of your assets. The basic philosophy of the present day Tories is that the baby boomers have stolen the future from their children who will pay for their old age, care, have inflated house prices for their benefit and encouraged immigration to drive down their income. If you don't believe me read David Willetts book on all of this called the Pinch which according to reports has influenced David Cameron and George Osborne. The latest attack on private sector pensions came much sooner than I expected so given the pace more will undoubtedly come before the year end.

  • Comment number 80.

    I anxiously await their announcement of how they will be cutting MPs pensions.

  • Comment number 81.

    So, first public sector pensions "need to be addressed", because they're "so much more generous" than the private sector.
    Then, within days, private sector pensions need to be cut back "to bring them into line" with the public sector. (Can anyone tell me why the government has any say in this at all? Isn't it something "negotiated" by a private citizen and his employer?)

    At any event, the intended direction of travel is obvious. Wouldn't it be more efficient and honest to tell us all now that any claims about the future value of our pension provision are so much hot air?

  • Comment number 82.

    #77

    My former employer, a successful blue chip financial services company who made me redundant a few years ago when outsourcing my job, wrote last month to tell me that with a bit of luck my pension might not disappear into thin air having earlier written to tell me that I wouldn't get an increase this year and was fortunate not to be getting a reduction!

    They and the government do seem to be singing from a remarkably similar hymn sheet.

  • Comment number 83.

    What right has the government to interfere with my pension contract? Of course it can, as any employer, seek to change contracts with its own employees but it has no such power in a private company employment contract. If it has then it should also require executive pay to increase by no more than CPI and also cap all levels of senior pay. It should also start intervening in grossly unfair contracts such as credit card deals at 30% APR and cap them as well.

  • Comment number 84.

    "This doesn't sound like a very good idea to me, surely we should be paying the people who fought for our country - not penny-pinching from them!

    And what happens when the current 20 something's reach pension age? There will be mass poverty in the UK! "

    Once again another change to which will force future pensioners into poverty, forgetting of course that these will be future consumers. And those making this change will of course have there own generous pension packages so "I'm alright jack". Why are they doing this? Because the monetary system is on the point of collapse. It requires continual exponential expansion as the money supply is created through debt. To create more money you create more debt, which requires more interest, which then requires more money etc etc. The government will continue to try to get everything to balance, but will never reach its goal. How long will they persist? Until everyone is p*ssed off.

  • Comment number 85.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 86.

    79. At 08:14am on 09 Jul 2010, Peter

    State pension = 100
    private pension = 80 so reduce state pension to 75

    oh, look! The private pensions aren't aligned now so

    reduce private pension to 68

    of look! The state pension is too high. I know, let's cut that down a bit.

    Keep going until both pensions are aligned at 0. First to the bottom wins the politics game and gets a free holiday courtesy of the nearest financial rent-a-quote and a job on the board!


  • Comment number 87.

    Are you all starting to get it yet?

    The Labour Party lost its way and took on tory ideas in order to become 'electable', and having abandoned the principles that might have helped the nation that was the point most of you decided they were worth voting for- when they were sheep in wolves clothing.
    Now you have voted for the wolves themselvs, and you bemoan that you are getting eaten!

    The conservative party higher echelons are, and always have been, motivated soley and purely by a greed and selfishness that borders on the adjective of 'evil'! This is the party that, historically, has blamed widows for being single, children for not earning their keep and the poor for not being rich. They oppossed the abolition of slavery and the vote for non-land owners and women. Do you really think they have changed!?!?

    This is the party who in their 1987 manifesto touted Nicholas Van Hoodlestradt as their idea of an exemplory businessman!!

    Do you have at least a million in the bank and go to a private school like Eton? No? Then you are scum. An oik. They don't want to know you, nor help you, nor care one way or the other if you live or die as long as their interests are served (and they don't have to hear about it too much, cos that gets in the way of them getting back to their lives of luxury)- and wrecking the future pensions of the majority of the population serves their current interests.

  • Comment number 88.

    #44, #53, #62, #69

    Yes I appear to have got it wrong, having just read the Hansard report of the Ministerial statement he does say 'Occupational Pensions and Protected Pensions' (my emphasis).

    It does not appear to affect people with Personal Pensions.

    According to the Pension Schemes Act 1993 the uprating of Occupational Pensions is set each year and the Minister has the right to change it.

    I'm not sure what the government is up to, these changes won't make much difference to the nations finances in the short term but will upset a great many people. Would it have taken too much effort to work up some examples of pension entitlements under both schemes to demonstrate the effects of this change on peoples personal circumstances.
    They seem to be blundering from one announcement to another, upsetting one group after another. First it is public sector pensions then school building programs and now private pensions.
    They also announced they want to cap public sector redundancy payments, will private sector ones be next ?

  • Comment number 89.

    This is a disgusting move by a government which termed pensioners as the forgotten casualties of the recession before the election. People have contributed to occupational schemes on the basis of RPI linked increases and existing pensioners receive such RPI increases, but it would seem many will not in the future. CPI is typically 1% p.a. below RPI, so the effect after 5 years plus will be very substantial.

    Companies, whilst paying their directors and City "advisers" (including former ministers) ever-increasing fortunes year after year for usually poor performance, have tried to avoid these pension commitments, and this new government seems determined to help them out despite the devastating impact on future incomes of pensioners.

    Companies will continue to close final salary schemes - this won't change that. What it will do is hit very hard those with accrued benefits and current pensioners, who will see their pensions decrease in real terms more and more as each year passes.
    Who indeed ever believed the published RPI figures anyway? - there have been numerous studies showing that this does not represent real inflation for pensioners and now the Tories are attempting to replace it with an even lower inflation "measure".

    Cameron and Clegg - you have just lost any chance of my vote in the future and I probably have 5 or 6 elections left in me.

  • Comment number 90.

    Was anyone else as surprised as I was to recently learn that the official retirement age in France was 60 compared to the UK's 65...now that's what I call European Union!

  • Comment number 91.

    In the emergency budget the Govt. announced that the basic State Pension would be increased by the greater of CPI, average earnings or 2.5% - and made much of this "triple-lock" to protect peensioners. If this is the right measure for State Pensions, why is just CPI (argueably expected to be the lowest of these over time) the right measure for private pensions?? The answer must be that the Govt. knows it would get the blame (ultimately, at the ballot box) if State Pension increases were limited to CPI whereas it hopes that once the current fuss has died down it will be the pension providers or employers who get the blame for imposing CPI increases year on year.

    All the comments about the Govt. attempting to meddle in private contracts are correct, and one really has to ask what is their REAL motivation for doing this. If it is to help reduce private sector pension defecits over time, and hence increase Co profits and corporation tax reciepts, then it seems very short sighted. The immediate impact is likely to be a further deterent to anyone thinking of investing in personal pensions, at a time when that is exactly what other parts of the Govt. are trying to encourage. It is difficult enough to encourage people in their 20s or 30s to enter long-term pension arrangements, without making it obvious that the agreed contractual terms can simply be swept away by any future Govt. at any time in the next 30+ years. Would any sane person commit to such a scheme?

  • Comment number 92.

    A key point missing from Robert's analysis is that former employees with deferred pensions are the big losers under these changes.
    Take someone mid-career who has contributed to a defined benefit pension entitlement (not necessarily a final salary plan). If they leave service, either voluntarily or through redundancy, their future indexation looks likely to be reduced not only after retirement but for the 20 years, say, prior to retirement.
    People in this situation look set to lose at least double the 10% that KPMG have estimated. That's quite a hit.
    This move will save no private sector pension plans (momentum against them is too great now) but it will impoverish many who have saved in the past.
    And yes, both my wife and I are in our 40s and have the great majority of our pensions savings in the form of deferred entitlements in private sector pension arrangements.

  • Comment number 93.

    'what goes around, comes around'...

    - Gordon introduces CPI in 2003 ish as the new (lower) inflation measure to keep the Europhiles off his back and pass their ecomonic tests
    - The BofE's target moves from RPI at 2.5% to CPI at 2% and suddenly we're back on track.
    - UK inflation 'appears' under control, resulting in a generally weak monetary policy. Massive asset bubbles follow - which Merv can't do 'owt about, which brings us to the carnage of 2007-2009.
    - Post 2009, austerity becomes the new catchphrase and hey, the new Govt sees the opportunity in these troubled times to benchmark the cost of living for wages and pensions to the CPI, which will hit those living closest to the poverty line the most, when they were already in the group least likely to profit from the asset boom in the first place. How many punches can these folks take?

    While there undoubtably has been a cruel Paul Parker-esque deflection, I would call that a spectacular own goal by the party hell bent on trying to improve life for the less priviledged.

  • Comment number 94.

    So, one more measure to "ease the burden" on business. Corporation tax rates coming down from 28% to 24%, Capital Gains Tax at only 10% on the first £5M of gains as opposed to the previously nigardly £2M exemption for "entrepreneurs", interest rates for savers fixed by the Bank of England at about one tenth of the inflation rate so that business can have cheap borrowing costs and now government legislation to dilute employers' inconvenient contractual obligations. Hopefully the government will now move on to abolish the Retail Prices Index altogether, thereby abolishing this inconvenient reminder of the ever increasing cost of living/currency devaluation. Perhaps we can then move on to solving oil prices and the middle east crisis by denying the Holocaust ever existed.
    Interesting that this latest government announcement was made by Steve Webb, the liberal democrat pensions' minister. Before the election his website was saying "The pension system is so complex that many people do not realise that their pension is made up of several different parts. The basic pension is going up, albeit only by a couple of pounds a week, but the other parts of the pension are being frozen. With the cost of living rising rapidly, this is going to put an even greater financial squeeze on pensioners. I have already heard from local people who are angry that this freeze is being sneaked through with so little publicity”.
    It seems that a ministerial salary and title are all that are required to turn lib dems into rabid right wingers:- as Clegg with his assult on public sector pensions and Huhne busily shovelling green subsidies to land-owning wind farmers.

  • Comment number 95.

    Well it looks like there will now be enormous pressure on Mervyn King to increase interest rates to get inflation under control. Otherwise there are not going to be many pensioners voting conservative in the next election....

  • Comment number 96.

    This country sucks with its fat greedy cats. If they keep the poor poor then they have total control. Im ashamed to be British. Its disgusting and totally unessessary

  • Comment number 97.

    In the interests of impartiality....

    What are the Government doing? first they attack the public sector pensions and now they're attacking the private sector pension holders - who were busy helping the Government attack the public pension holders at the time.

    Talk about being stabbed in the back. How to lose friends and anger people - by David Cameron and Nick Clegg.

    What Robert has not mentioned is the only difference between RPI and CPI is house prices. Now if you remove house price inflation from the equation then you're assuming that inflation is unaffected by house prices.
    ...now remember back a few years ago when the Government decided to use CPI as a measure than inflation rather than RPI - and to use that to set interest rates.
    mmmmmm - didn't we get a housing bubble brought on by the fact that the 'basket of goods' were falling in price, but the main source of expenditure - and crucially income (from remortgaging) was in fact house prices?
    By stripping out house prices from the equation, you're not going to just make pensioners poorer - but you're going to inflate the earnings of home-owning, non-pensioners - as they will be benefitting from house price rises (assuming there are some). I wonder how long before pensioners are having to remortgage in order to maintain their standard of living.

    ....you could also read into this which way the Government thinks the house prices are heading. It seems to me they're counting on starting another bubble - rather than expecting house price deflation (which switching from RPI would cost them - i.e. RPI will be brought down by falling house prices.

    Now I wonder if this is down to the political aims of the home owning Tories? - If you own a house then you will be pleased another bubble is coming - asset inflation is better than asset deflation.

    For all the rest of you - well it's tough - just like it was in the 80's when the Tories created the same situation with their right to buy scam.

    Lets hope the people of Britain don't fall for this a second time.

  • Comment number 98.

    Typical of the Tories trying to help their high powered friends in big business.

    If your pension or deferred pension rises annually at 5% or the rate of RPI, whichever is lower that is contractual.

    Changes cannot be made unless agreed by members otherwise pension funds and companies risk being sued for breach of contract.

  • Comment number 99.

    Most of these post don't understand the proposals. Legislation has been introduced over the years to ensure that pensions and deferred pensions are increased. Where occupational schemes have rules where the increases are linked to the legislation then they automatically switch to the CPI. Where the rules specify RPI increases then they will have to change the rules to use the lower CPI.

  • Comment number 100.

    Post 83: "What right has the government to interfere with my pension contract? Of course it can, as any employer, seek to change contracts with its own employees....."

    I see why you might think this, but should they be changed retrospectively, as is planned here?

    People in public and private occupational pensions signed up for jobs with a known set of benefits, (salary/holidays/pension/car/healthcare) etc. I can see the argument for the government changing employment T&C for 'its own' new starters. I see no moral justification for government unilaterally changing the T&C of existing employees - unless this is with their agreement - This group contracted with their employer for a defined set of benefits (including at least in some cases RPI indexation). And I see no legal justification for a retrospective change in the T&C of former employees whose pensions are already in payment. It's akin to breach of contract for existing and former employees.

    I believe this concept applies equally to both public and private occupational pensions.

    What is being missed (as Post 91 says) is the real reasonS why this is being done. Yes it will 'save' cash toward the deficit; yes it will lower government spending for its own employees; yes it will make institutions like the Royal Mail more attractive to buyers by reducing their future pension liability; yes it will augur well for a future change to the uprating of all index linked transactions such as personal pensions, (not forgetting reduced savings-side payouts for eg NS&I Index Linked savings),

    But chiefly it will do two other things, (as Post 95 partly spotted). As others here have said, it will dampen the impact of both mortgage interest and Council Tax increases (because CPI includes neither). So longer term, the Bank of England can afford to let CTax increases (which government is limiting for the next two years, but after then the cap is coming off), and mortgage interest rates, rip ahead of the new CPI measure of 'inflation'

    If, as I expect, RPI gets up toward 10% and stays around CPI 2-5% it will allow our national debt to be (at least partly) inflated away whilst pensioners and property owners will pay much of the price. Bumpy rides are ahead for many. The RPI/CPI argument is far deeper than just pensions.

 

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