Uprating Private Sector Occupational Pensions (Revised Impact Assessment)

Friday 11th February 2011 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Today, the Government will publish an updated version of their impact assessment for the move to the consumer prices index (CPI) for uprating private sector occupational pensions. A further update is anticipated when the Government respond to the consultation on this issue.

On 8 July, Government announced the move to using the CPI as the basis for the statutory minimum uprating of occupational pensions. On 8 December, the Department published a consultation document on the impact of using the CPI for revaluation and indexation of private sector occupational pensions, and an initial impact assessment was published to accompany the consultation document.

Following publication, an error in the calculations has been identified. Additionally the Regulatory Policy Committee (RPC) has reviewed the calculations underpinning the impact assessment. Acting on the feedback from the RPC, the Government have made a change to the method used to calculate the net present value (the value expressed in today’s money) of the reductions to scheme liabilities. The version to be published later today takes account of these two changes.

The Government are currently undertaking research into private pension schemes rules and the likely reaction of employers to the decision to use the CPI which will extend our evidence base for calculating the impact on scheme liabilities. The outcome of this analysis will feature in the next edition of the impact assessment.

A copy of the revised impact assessment will be placed in the Libraries of both Houses, and is available on the Department’s website at: http://www.dwp.gov.uk/docs/cpi-private-pensions-consultation-ia.pdf