The following Pensions guidance note Produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:
THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL PENSION SCHEMES
Subject to certain exceptions, legislation requires occupational pension schemes to increase pensions in payment (commonly known as indexation) and revalue deferred pension rights (commonly known as revaluation) by a specified minimum level each year. This is to provide a measure of inflation protection in relation to those pension rights.
Up until 31 December 2010, the statutory minimum indexation and revaluation level was determined by reference to the Retail Price Index (RPI), subject in both cases to a cap.
For further information on the indexation and revaluation requirements, see Practice Notes: Increasing pensions in payment and Early leavers—revaluation.
On 22 June 2010, the government announced that it intended to use the Consumer Price Index (CPI), instead of RPI, as the basis for increasing most benefits and public sector pensions (for further information, see Other affected areas below). The government's rationale for this move was that CPI provides a more appropriate measure of inflation than RPI and is more consistent with the measure of inflation used by the Bank of England.
Subsequently, on 8 July 2010, the government announced proposals to extend the use of CPI for the statutory indexation and revaluation of private sector occupational pension schemes.
Since then, the government has announced its intention to consult on proposals to change the way in which RPI is calculated so
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