Pressure is growing on ministers to reconsider their decision to link pension benefit rises to the Consumer Price Indexation (CPI).

The move, announced in July by Pensions Minister Steve Webb, has caused alarm as it is likely to result in lower payments to retirees, as the CPI usually posts a lower measure of inflation than the current link used by occupational schemes - the Retail Price Indexation (RPI).

Several firms have already voiced their concern over the switch (Pensions Age 13/7/2010) and now a group of industry professionals who are members of Mallowstreet, the online pensions community, have written to the Department for Work and Pensions (DWP) asking for a review and public consultation on the change.

A number of members have put their name to the letter which calls for a re-think and argues that there are several complexities behind what appears at first to be a simple adjustment to member benefit calculation.

John Amos, deputy general secretary of the Civil Service Pensioners’ Alliance (CSPA) has welcomed the letter from Mallowstreet and condemned the Coalition Government’s indexation reform.

“Before the General Election, the CSPA received assurances from both the Liberal Democrats and the Conservatives that any changes to pension rights would honour accrued rights and would protect indexation,” he said.

“The Government’s decision to change the rules on indexation, hidden in the small print of the budget and in a short written statement, will affect schemes in both the public and private sectors and will mean that savers are being stripped of the security against inflation they thought they were buying with contributions into occupational schemes.”

He added that the promises given to pensioners before the election over their pensions, meant that the Government was now acting in an “underhand way”.

The CSPA have used recent estimated figures released by Towers Watson to back up their argument. The consultancy firm claimed that the changeover to CPI would mean that an occupational pensioner currently receiving a pension of £10,000 a year would be more than £800 a year worse off by 2016.

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