RPI to CPI shift 'will have massive pensions impact'

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RPI to CPI shift 'will have massive pensions impact'

Wed 26th Oct 2011

The proposed shift from using retail price index inflation (RPI) to consumer price index inflation (CPI) is set to have a dramatic impact on the values of pensions for Brits, it has been revealed.

Fraser Smart, UK managing director for Buck Consultants, told listeners to the BBC Wake Up to Money podcast that as RPI is traditionally one per cent higher than CPI, the cumulative effect of relating pension schemes to CPI could result in pension values falling over the years leading up to retirement.

He commented: "There is a much bigger impact for people who leave their employers 20 years before retirement. The accumulative value in that case could be as much as 25 per cent."

Billy MacKay, marketing director at A J Bell, recently told listeners to the FT Money podcast that a combination of factors have meant Brits are facing serious issues regarding their pensions income over the coming years as a result of the financial downturn.

He argued that record low gilt yields in the UK alongside very volatile market conditions have pushed down the value of pensions for many.

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