UK government legislation could force switch to CPI
UK - The UK government may force defined benefit pension schemes to adopt the consumer price index (CPI) even if it overrides existing scheme rules promising retail price inflation (RPI) for pension increases, the chief executive of the National Association of Pension Funds (NAPF) has warned.
Speaking at its annual trustee conference, Joanne Segars said she believed the government would make CPI indexation retrospective as well and that it had underestimated the complexity of the change.
She said that while the introduction of CPI would reduce scheme liabilities, it would also reduce members' benefits over the long term and that trustees would have to balance the switch to CPI carefully.
A recent NAPF Pulse Survey has found that 25% of trustees regard the switch to CPI as the biggest challenge, while 78% think the Pensions Regulator (TPR) should be more accountable to its investors, she said.
Pensions minister Steve Webb said a consultation paper would be published tomorrow, setting out how schemes with RPI hardwired into their trust deeds should implement the switch to CPI, but declined to say whether this would involve retrospection and would be mandatory.
Elsewhere in her speech, Segars complained of a lack of consistency when NAPF members talked to the regulator.
"TPR needs a new statutory objective in handling its members," she said. "We want to see a change in how the regulator operates."