“This change will have a double-whammy impact on pensioners’ real incomes.”
Brian Peters, pensions partner at PricewaterhouseCoopers, generally welcomes the move, but is concerned as to how pension schemes will manage their liabilities without the necessary vehicles to hedge their risk.
“The big question is whether the government will start issuing CPI-linked gilts so that pension schemes can hedge their risk effectively,” he said, as RPI-linked gilts are the only ones currently available.
“Unless CPI linked gilts are issued, pension schemes will have no means of hedging the risk and insurers may charge greater premiums. This in turn could mean any cost savings are not fully reflected on the pensions buyout market.”
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