Confusion surrounding the changeover from using the consumer prices index (CPI) to the retail prices index (RPI) as a measure of inflation for occupational pension schemes, has already caused delays to de-risking transactions, says MetLife Assurance Limited.

The firm said the Government must end uncertainty over the switch as soon as possible, to help trustees make the right decisions for their schemes. It also said that the planned move must adopt a simplistic approach to avoid undue cost and administrative headaches.

Metlife is calling on the Government to reconsider the basis of statutory revaluation of deferred benefits, and of statutory increases to pensions in payment, and has highlighted questions that must be asked on the extent to which the changes will apply automatically to schemes.

“It is imperative that further details on this change in legislation are provided as soon as possible to avoid uncertainty which will inevitably impact trustees’ ability to make important decisions,” explained Dan DeKeizer, chief executive officer, at the firm. “We are already aware of a number of pension schemes that have delayed moves to de-risk as a result of the uncertainty caused by the impending legislation. Any delay could be detrimental to the funding position of the scheme and ultimately the security of member benefits.”

He said it is important to consider how insurers are approaching this change, and added that the Government should consider actively generating a CPI swap market through the issuance of CPI-linked gilts. This, Metlife said, should be done in advance of any new legislation being introduced to ensure there is a sufficiently liquid market for trustees to approach.

Metlife said mismatched liabilities, the complexities of a CPI underpin and the impact on the Pension Protection Fund (PPF) must also be addressed.

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