Private sector pension changes to be questioned
Many in the private sector are looking to replicate the move announced by the UK government which will see future public sector pensions linked to the consumer prices index as opposed to the retail prices index. Historically the consumer prices index has been lower than the retail prices index with some experts forecasting that up to £100 billion could be taken from the current £239 billion black hole in private sector final salary pension schemes. But will it be that easy?
While the move to change from the RPI to CPI should be fairly straightforward in the public sector, arguments with unions and strike action aside, there could be a number of problems with the private sector. A number of private sector final salary pension schemes have specific reference to the RPI in their small print and when you bear in mind a conversion to the CPI would be "detrimental to benefits" it is unlikely that scheme members would agree to this.
As a consequence, while potentially a switch to the CPI could save the private sector around £100 billion and take financial pressure off many companies, it may not be very easy to implement. Time will tell although one thing is for sure, the UK pension arena of today will be very different in the future.
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