News

The UK Government has announced that they intend to use the Consumer Price Index (CPI) in place of the Retail Prices Index (RPI) as the index for determining increases for public sector schemes and has further announced that it intends to make provision within the law for the same index to apply to pension increases in private sector occupational schemes.  The UK Government believes that the CPI provides a more appropriate measure of pensioners inflation experiences and is consistent with the measure of inflation used by the Bank of England.  The CPI measurement excludes mortgage payments and house prices.

At this stage, however, there is no further information other than this proposal.  For example the UK Government has not announced the timing of this change or what legislative changes it will make in order to implement this. It is therefore not yet clear how these changes will impact the SCPF.

It is important to note that this proposal is a change to the statutory minimum, i.e. the minimum that a pension scheme must increase pensions by. The statutory minimum is currently RPI up to a cap of 2.5% for pension accrued from 6 April 2005. 

Previously the statutory minimum was RPI up to a cap of 5% for pension accrued between 6 April 1997 and 5 April 2005.  Prior to that no statutory minimum existed and so some pension schemes did not increase their pensions at all.  The SCPF provides RPI up to a cap of 7% for pre-2009 member, or RPI up to a cap of 5% for post 2009 members in respect of all pension, whenever accrued.

[Please note the guarantees that apply to the absorbed fund sections of the SCPF (Enterprise, COLAS & Moplefan) differ to the SCPF and the potential impact on these funds will also be investigated.]

We will provide further communications once it is available, but we do not expect any further information until at least Q4 2010.

22nd July 2010

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