UK roundup – MetLife, Pension Risk Behaviour index, RPI e-petition
UK - The importance of inflation risk has increased for defined benefit (DB) pension scheme trustees and sponsors over the past months, a new report by MetLife Assurance has found.
According to the 2011 UK Pension Risk Behaviour index (PRBI), trustees and sponsors now rank inflation risk as the sixth most important risk out of 18 factors, due to uncertainty over the switch from the retail prices index (RPI) to the consumer prices index (CPI) for indexation of benefits.
The most important shift was seen among trustees, with inflation risk moving up in the importance rankings from 14th in 2010 to fifth in 2011.
The report said trustees may be placing greater importance on inflation risk due to the significant amount of attention given to inflation since the government's announcement of the proposed move to change statutory indexation to CPI from RPI in July 2010.
According to MetLife, a statement from pensions minister Steve Webb confirmed there would be legislation to prevent CPI having to be used as an underpinning for schemes that use RPI and ruled out legislation forcing schemes to change to CPI from RPI.
Emma Watkins, director of business development at MetLife Assurance, said: "While we welcome the government's statements that a CPI underpin will not be required, as it would have increased complexity and cost, it will not be until legislation is enacted that the uncertainty faced by trustees and sponsors over the past year will be removed."
MetLife notes that latest CPI inflation figures show a rise from 4.2% in June to 4.4% in July.
In other news, the petition launched on the government's new e-petition website, which aims to reintroduce the RPI measures, has received more than 15,000 signatures since its launch at the beginning of this month.
The petition - launched by Jim Singer - states: "Many workers in the public and private sector have contributed to their pensions on the understanding that, on retirement, these pensions would be increased each April by the preceding September's retail prices index (RPI) rate.
"The change [to the consumer prices index], which has been introduced in most cases without any prior consultation, will mean a steady reduction in spending power for pensioners as they progress into their retirement.
"Given the promises that have previously been made, the RPI measure should be reintroduced without delay to ensure the spending power of these public and private pensioners is maintained."
The petition, which will close on 8 May 2012, will need to get at least 100,000 signatures to be debated in the House of Commons.