By Adam Cadle
The large majority of the British public are still unaware of the overall impact of changes to the indexation of private pensions, two years on from the Chancellor of the Exchequer’s decision to switch from retail price indexation (RPI) to consumer price indexation (CPI).
In a survey of over 2,000 people in Great Britain aged over 18, Aon Hewitt revealed that just 16 per cent of respondents said that they were aware of the relationship between inflation and their pensions, and the effects that this would have.
Statistics also showed that just 26 per cent of respondents were fully aware of the differences between RPI and CPI and do not understand how inflation affects the purchasing power of money.
Aon Hewitt partner Lynda Whitney said: “The majority of people are unaware of the potentially significant effect that changes in inflation and the move to CPI could have on their income in retirement. One per cent a year may not sound much but over the period from leaving service to retirement and the retirement period this could lead to a reduction of 25 per cent of their retirement benefit.
“With auto-enrolment bringing many more employees into pension plans, there is no time to waste in ensuring that they know how inflation relates to their pensions, and their likely spending power in retirement.”