The Pensions Regulator (TPR) has released a statement that aims to help trustees and employers to manage the impact of the proposed changeover to using the consumer prices index (CPI) for scheme indexation, which has been welcomed as a “sensible” move.

The statement acknowledges that while the legislation is yet to be finalised, trustees may wish to prepare for changes by reviewing scheme rules and clarifying expectations around indexation in their member communications.

Trustees should communicate with their members on the impact as soon as possible, once known, even if it is likely to be negligible. Interim communication to assist members how may have to look at transfers or retirement planning, or who are concerned about “press coverage”, should also be given consideration.

TPR said until legislation is altered, trustees must continue to take decisions relative to the current situation, and the current funding regime and associated processes must also remain in force.

Should the changes result in lower estimated liabilities for schemes, TPR said it would expect shorter recovery plans to be submitted, which in turn would lead to greater security for members and greater certainty for employers.

However, this final element of the statement has been attacked by financial consultant Mercer for its “arbitrary” imposition of additional security on schemes.

Dr Deborah Cooper, Head of the Retirement Research Group at Mercer, commented: “The government's announcement to replace RPI with CPI as the measure to determine statutory increases will, in some cases, result in lower increases to pensions in future.

“Trustees should take this into account when considering how liabilities should be financed, and explain the consequences of this to members. However, it is not appropriate for TPR to attempt to impose additional security on schemes over and above what trustees consider is reasonable when carrying out their statutory duties, in agreement with sponsoring employers,” she added.

Share Story: