Inflation rises to cost public sector workers more

Public sector workers are expected to lose thousands of pounds more due to the increasing divergence between different measures of inflation.Inflation rises to cost public sector workers moreIn 2010, the government said their pensions should rise in line with the consumer prices index (CPI) rather than the retail prices index (RPI).

The aim was to save money because the CPI is designed to rise more slowly.

If the new estimate turns out to be correct, the widening gap between the two inflation measures will offer a further 17% saving to the government on the cost of inflation-proofing public sector pensions.

The OBR forecast that by 2016 the gap between CPI and RPI could be as high as 1.8 percentage points, predicting that CPI will go down to 2% by then while RPI stays higher at 3.8%.

If someone retired on an annual pension of £10,000 a year (a typical figure for a teacher), then over 20 years the uprating of their pensions by just 2% (the Bank of England’s CPI target) would see them accrue total pension payments of £245,500.

The old assumptions would have put RPI 1.2 percentage points above CPI at 3.2%. If their pensions had been uprated each year by 3.2% RPI they would have received total payments of £278,857.

If 3.4% RPI were applied, reflecting the 1.4 percentage point gap, the pensioner in question would receive £284,923.

Thus, last year’s adoption of CPI as the relevant measure of inflation will now cost the pensioner in this example a further £6,066 over 20 years, to £39,423 in total.

The impact of using CPI rather than RPI on those private sector schemes that can adopt the slower-moving measure, was assessed by the Department for Work and Pensions in July 2011.

It calculated at the time that the schemes would save collectively £3.342bn a year. A further 17% saving suggests they would save £550m more.

It saw pensioners in schemes covering civil servants, teachers, NHS employees, local government and others, receiving an increase of 3.1% instead of 4.6%.

If the further 17% saving is applied to figures published by the Treasury in the 2010 Budget, then by 2014-15 the government will save an extra £970m, on top of the first estimate of an annual saving, by then, of £5.84bn.

However, that saving covers not only public sector pension schemes but also state benefits and tax credits, which are also affected by the new policy.

If you are are worried about your pension and looking for an extra income– why don’t you either please click here now- or  just pick up the phone and give Andy a call on 01451 832 206 or Andy’s mobile 07747 035 208 for an informal chat about the opportunities available to you.

December 6, 2011 · Home Based Jobs · One Comment
Tags: , , , , , , , , , , , , ,  · Posted in: Bristol Jobs, Cheltenham Jobs, Cotswold Jobs, Earn Extra Income, Earn Money, Home Based Jobs, Home Based Jobs Bristol, Home Based Jobs Swindon, Part Time Employment, Part Time Jobs, Part Time Jobs Bristol, Part Time Jobs Swindon, Pension Income, Swindon Jobs, Uncategorized

One Response

  1. Kathrin - March 11, 2012

    I used to be suggested this blog by way of my cousin. I’m now not sure whether this put up is written through him as nobody else know such exact about my problem. You are incredible! Thank you!