Private-sector pension payouts to fall
12th July 2010
Millions of people with private-sector pensions face lower payouts after the Government announced plans to change the rate at which they increase each year.
Pensions Minister Steve Webb has called for the schemes to rise each year in line with inflation as measured by the consumer prices index (CPI), rather than the retail prices index (RPI).
The move is likely to cost workers hundreds of pounds a year over the course of their retirement, as CPI is generally lower than RPI.
The move has attracted anger, as thousands of UK workers who successfully managed to protect themselves during their working life with income protection and real life cover, now face an unexpected drop in income.
Accountants KPMG said the change could reduce UK private sector pension liabilities by 10%, or about £100 billion.
It is expected to be introduced next year, bringing the inflation measure used for private sector pensions in line with public sector ones.
The Government also recently announced that benefits and the state pension would rise in line with CPI rather than RPI in future.
Copyright © Press Association 2010
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