Current and future pensioners are being hammered by the ConDem’s austerity programme by a simple act of changing the inflation assumption that is used to increase our pensions every year.
In the June 2010 Budget Osborne announced that the Government will “switch to a system where we up-rate public service pensions in line with consumer prices rather than retail prices”. These changes will save considerable amounts of money for public sector employers while reducing the incomes of current pensioners and future pensioners.
The government's policy change has transferred wealth from pension scheme members to sponsoring employers, who are busy quantifying these windfalls. The Treasury expects the move to save the Government £5.8bn by 2015. This makes a mockery of the claim that the pensions we’ve earned will be protected.
A public sector worker who was 80 and received a typical pension of £5,500 a year after seeing it increase annually in line with RPI would only have received £4,845 a year if their pension had increased in line with CPI over the past two decades. Someone who retired 10 years ago would have seen the value of their pension fall by 8% if it had risen in line with CPI rather than RPI.
Various commentators estimate the change to inflation increases could cost the average public sector pensioner - including those already retired - about £40,000 over the course of their lives to the age of 85.
You know its bad when the armed forces raise their voices the Forces Pensions Society has estimated that in some cases the change will cost individual members more than half a million pounds each in lost pension income, between leaving the armed services and the end of their natural lives:
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