Annual pension accrual for members of private sector defined benefit (DB) schemes could drop by one third following the move to consumer prices index (CPI), according to a revised impact assessment published by the government late on Friday.
The document states that for the 2.5 million active members of DB pension schemes the total value of annual pension accrual will fall from £7,250 under retail prices index (RPI) revaluation indexation to £4,750 under CPI.
The revised impact assessment has been published after an error in calculations was found in the initial document that assessed the impact of the move to CPI.
The revised impact assessment stated: “As soon as this policy is introduced there will be a change in the expected value of the stock of pension liabilities of scheme sponsors as pensions they had anticipated revaluing and indexing by the RPI inflation rate will now be revalued and indexed by the (typically lower) CPI inflation rate.”
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