RIP RPI? Linking Pensions to Consumer Prices

Trustees need to tread carefully if they are considering linking pension increases to the consumer price index.

The Government announced in September 2010 that it intends to link statutory minimum pensions increases to the consumer price index (CPI) rather than the retail price index (RPI). Trustees will need to watch for further announcements and keep on top of the changes to legislation as part of the move to CPI.

Trustees should review existing scheme rules for indexation and revaluation and consider the impact of the new corresponding statutory rules. They will need to understand the relationship between the CPI and RPI and the potential financial impact on the scheme of switching to CPI.

Keeping communications open with employers will be vital. Trustees should be prepared to revisit funding agreements and review various actuarial factors once full details emerge.