Govt switches pension benchmark to CPI

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The government will today switch the inflation benchmark for pensions and benefits from RPI to CPI, potentially shaving millions off investors' savings.

CPI was today announced at 3.1%, still well above the government's target of 2%, but far below RPI which was 4.7% last month. The Office for National Statistics says on average the gap between RPI and CPI is 0.75%, but it is expected to grow over the past five years. This means, in relative terms, money in pension pots will be worth less when it is paid out than when it was paid in. Towers Watson calculates even if the gap between PRI and CPI remains as it is, pensioners currently receiving £10,000 will receive £11,400 rather than £12,200 in 2016. Whilst all private pensions will n...

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