25 senior pensions industry professionals have written to Iain Duncan Smith, the Secretary of State for Work and Pensions, to complain about linking defined-benefit pensions to the Consumer Price Index, rather than the Retail Price Index.
The government announced the switch to CPI in July without consultation, arguing it would help employers cut their pensions bills, but Philip Read, chairman of the British Coal Staff Superannuation Scheme, has described it as a “potential nightmare” since most pension schemes have already written RPI into their rules.
Employers will also need to renegotiate pension changes with staff and unions, which Smith believes could be “explosive” and even result in legal complaints under the Human Rights Act.
Simon McClean, who sits on Commerzbank’s pension fund committee, has also slated the government’s decision to switch to CPI without first conducting a proper public consultation. He said: “I bet that Her Majesty’s Government hasn’t even begun to scratch the surface on the implications of a move to CPI. I can’t wait to see their response to what the pensions industry has to say.”
The signatories to the letter are all members of Mallowstreet, an online “social networking forum for pensions”, which counts pension trustees, asset managers, consultants and providers among its membership.
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