Pension changes proposed by the Government have been described as a ‘potential nightmare’ by industry experts.
Members of the Mallowstreet pension forum have written to the Government to oppose the changes to the inflation measuring index, which was outlined in the Emergency Budget as part of their pension reforms.
The change in question is the Government’s decision to link pensions to the Consumer Price Index rather than the Retail Price Index. Both the CPI and RPI are inflation measures but they come up with different values because there are slight differences in what goods and services they cover.
CPI is generally lower than RPI, making RPI a better index for savings.The move is an attempt to streamline pension indexing and save money on costly public sector pensions.
The new rules will come into force as early as next year and could mean millions of people with private sector retirement schemes could see their pensions reduced by as much as 25 per cent.
But a letter has been sent to the Government claiming that the pension changes should not be sprung on pension savers and a full consultation process should be undertaken.
Members of the Mallowstreet pension forum include pension experts from Britain’s top insurers and leading industry figures.
But the Department for Work and Pensions has disputed the forum’s claims saying that they need to be consistent with private pensions.
According to a DWP spokesman the government had "already decided that CPI is the most appropriate measure of inflation for state benefits, [and] it is appropriate to take a consistent approach for private pensions.
“Pensions linked to CPI will be lower over a period of time - some estimates put the drop as high as 25%.
"As the change affects the requirement for statutory minimum increases, schemes may continue to make more generous provision.
"No consultation was therefore considered to be necessary."
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