CPI indexation: a saving or a cut?

A couple of days after Liberal Conspiracy disclosed the – denied – revelation that BBC journalists are being instructed to use ‘savings’ rather than ‘cuts’ in their coverage of government announcements, it came as something of a surprise that call me Dave spoke to his party conference promising ‘less debt, more saving’: it seems to me that less debt, more cuts is exactly what the ConDems are all about.

But – taking the promise at face value – if we can look forward to a government that seeks to encourage saving, then perhaps we can look forward to this government, after all, turning away from the proposed switch to indexation of pensions in payment by the Consumer Price Index rather than the Retail Price Index. The sleight of hand switch to a lower value indexation for future pensions increases in defined benefit schemes announced last July is no less than a government-inspired theft of workers’ occupational pensions. It will rob pensioners of thousands of pounds, with the loss rising with every year of retirement, leaving them more dependent on means-tested state benefits and taking crucial spending power out of the economy. And if the government can do that, to those who are pensioners already as well as to future ones, and in the face of pensioners’ expectations as to what they have been paying into all their working lives and frequently in spite of private scheme-based agreements on how indexation will be dealt with, why should they bother with a pension?

A DWP consultation on this issue as regards private sector occupational schemes closed last week: if the government is serious about encouraging more saving, it will have the courage to do away with this proposal and respect pensioners’ continuing rights to a pension indexed in line with RPI.

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