Pensions  

Disappointment over RPI for final salary pensions

Last week (CORRECT), the Office for National Statistics announced that the government would keep the current RPI calculations, which Gary Squires, partner for pensions advisory services at advisory firm Zolfo Cooper, said was “a disappointment”.

He said: “The logic of the decision not to change the calculation of RPI is clear but it will be a disappointment for many employers sponsoring final salary pension schemes.”

Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, said: “This was a missed opportunity for the chancellor to align pensioners’ inflation proofing more closely with the actual reality of their expenditure and costs and will probably come as a disappointment to employers sponsoring final salary schemes.

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“A reduction in the rate of RPI would have reduced some pension scheme liabilities; this in turn would have reduced the amount of money which employers have to pump into these schemes to reduce their deficits.”

He said instead, there should have been a new measure created, called a ‘Pensioners’ Inflation Index’.

However, others welcomed the ONS’ decision not to change the calculations. Ros Altmann, director general of Saga, said it was “fantastic” that the national statistician had listened to the concerns raised by the consultation responses last year after the government announced it would look into whether the RPI - to which pensions are linked - needed to be recalculated.

Crispin Lace, director of consulting and advisory services at Russell Investments, said: “Many will be heaving a sigh of relief as they see index-linked assets price rises, or their future benefits preserved.”