Pension schemes and the CPI/RPI switch - what does it mean?

  • The Retail Prices Index (RPI) has been replaced by the Consumer Prices Index (CPI) as the Government's measure of inflation used for determining minimum inflation-proofing for deferred
    pensions and pensions in payment from occupational pension schemes.
  • The last two annual revaluation orders have been calculated by reference to the CPI meaning that, for some schemes, the statutory minimum measure for inflation-proofing has been the CPI since January 2011.
  • The Pensions Act 2011, in force from January 2012, amends the legislation governing increases of pensions in payment to extend the CPI statutory minimum to some other schemes.

The effect on pension schemes will generally be scheme specific and will depend on the provisions of the trust deed and rules. For example, in the recent Danks v QinetiQ Holdings Ltd case, the High Court held that the trustees had discretion as to the basis for calculating indexation and revaluation. Some schemes will continue to have RPI as the measure used for inflation-proofing, where this is required under their rules.

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