Department for Work and Pensions
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Consultation response on the use of CPI for private sector occupational pensions

The Government will not introduce legislation to override pension scheme rules, Pensions Minister Steve Webb confirmed last week.

Responding to a consultation which sought views on the impact of using the Consumer Prices Index (CPI) for private sector occupational pension schemes, Pensions Minister Steve Webb said:

"We want people to have confidence and trust in their pensions. We have set CPI as the statutory minimum, but many schemes can and will pay more, and we will not give schemes power to change their rules.

"We also know that many schemes now find that their funding position is more secure as a result of the change to CPI and this move in the long term will help make defined benefit schemes more sustainable."

Research by the DWP, reveals that out of those pension schemes that have rules referencing RPI, but could move to CPI, the majority say they wouldn’t.

The Government has also listened to concerns raised in response to the consultation and is looking at legislating to ensure CPI doesn’t act as an underpin for schemes using RPI to calculate revaluation of deferred pensions as well as increases to pensions in payment.

Steve Webb said:

"We don't want to disincentivise schemes who wish to continue with RPI increases, which is why we will be looking to remove the CPI underpin for revaluation of deferred pensions, keeping things simple for business."

Notes to Editors:

  1. In the emergency Budget the Chancellor confirmed that the Consumer Prices Index (CPI) would be used as the inflation index for increasing pensions and benefits annually.
  2. From April 2011 CPI will also be used for the statutory minimum revaluation and indexation for occupational pension schemes and for payments made by the Pensions Protection Fund (PPF) and the Financial Assistance Scheme (FAS).
  3. The Pensions Minister launched a consultation on 8 December 2010, to look at the impact of using CPI as the measure of price increases on private sector occupational schemes and whether we should make it easier for schemes to move to CPI.

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