Research is published today by the Department for Work and Pensions which presents the findings from a quantitative survey that explores the effect that changing statutory revaluation and indexation from RPI to CPI might have on private sector defined benefit schemes.
The key findings of the report were as follows:
- A minority of schemes (16 per cent) are linked to statute for both indexation of pensions in payment and revaluation of deferred pensions (representing 18 per cent of scheme members). So in the absence of changes to their scheme rules, they would in future use CPI to increase pensions in payment and revalue deferred pensions.
- Around two-fifths of schemes (39 per cent) have rules that link revaluation to the statutory minimum while indexation rules explicitly reference RPI. Three in ten (29 per cent) schemes, accounting for 24 per cent of members, have explicit reference to RPI for both indexation and revaluation.
- Around half of schemes linked to RPI have provision to change their rules and so could adopt a measure other than RPI without the need for further legislation (53 per cent in the case of indexation and 45 per cent for revaluation).
- However, only a minority of these schemes believe they are likely to make changes to their scheme rules - of those schemes who could change their rules, 16 per cent of those linked to RPI for indexation felt they are likely to do so and 30 per cent of those linked to RPI for revaluation.
- Since the move to CPI was announced, the majority of schemes have sought professional advice (75 per cent) and reviewed their scheme literature (70 per cent). A third of schemes (32 per cent) have also made a formal assessment of how their liabilities would change.
- The majority of schemes (69 per cent) believe that the funding position of their scheme will be more secure as a result of the changes, while 15 per cent felt it would make no difference. Three-quarters (74 per cent) of members are part of schemes which feel they will be more secure.
Notes to Editors:
- The working paper “Research exploring the effect of uprating by CPI on occupational pension schemes” is published on Thursday 16 June 2011 and is based on a survey carried out by IFF Research Ltd.
- The survey was conducted using telephone interviews among a representative sample of 200 defined benefit pension schemes, with more than 11 members.
- Fieldwork for the survey was conducted between January and February 2011.
- The research report and summary are available free on the DWP website: http://research.dwp.gov.uk/asd/asd5/wp-index.asp