Employers expecting a cash windfall following changes to the way workplace pension increases are calculated are likely to be disappointed, a top pensions expert has warned.
Earlier in July, pensions minister Steve Webb announced plans to legislate so that private occupational pensions would be uprated by the consumer price index (CPI) rather than the retail price index (RPI), which includes mortgage interest payments.
But in a statement issued yesterday (21 July), the Pensions Regulator said it expected any savings gained from the move should be used towards funding pension scheme deficits rather than giving employers a windfall.
The watchdog said that if the move to CPI results in a reduction in a scheme’s liabilities, it “would expect that this would generally lead to shorter recovery plans resulting in greater security for members and greater certainty for employers”.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Andrew Bradshaw, partner at Sackers law firm, said: “There has been a growing realisation among employers that the proposed CPI changes may have a limited impact because their pension scheme members could have a legal right to RPI increases. Now the Pensions Regulator is saying that it will take a dim view of employers looking to make immediate costs savings.”
Deborah Cooper, head of the retirement research group at consultancy Mercer, said it was “not appropriate” for the regulator to attempt to impose additional security on schemes over and above what trustees considered was reasonable.
