Pensioners Lose 250 Million Pounds in 2013

Pensioners will lose approximately £250 million in 2013 due to state pensions being linked to the Consumer Price Index (CPI) instead of the Retail price Index (RPI) from April of next year.

It was announced in September that the Consumer Price Index rose to 5.2% over the previous 12 months whereas the Retail Price Index increased from 5.2% to 5.6% during the same period.

The inflation figure for September is very important as this is the figure used to calculate the increase in both state pension and public sector pensions

The basic state pension will now be increased by either 2.5%, earning or inflation each year. This means that whereas the RPI figure was used in April 2011, the lower CPI figure will be used in April 2012.

This change will mean an estimated 12 million people receiving state pension will lose out on approximately £12 million.

From April 2012 people recieving pensions from public sector pension schemes will find their pensions linked to CPI instead of RPI. This will mean that a person receiving a £10,000 a year pension will be approximately £200 worse off in 2012/2013.

Over a 20 year period the annual pension received could be £16,117 using CPI compared to £19,950 using RPI. this represents a loss of £3,833 per year. These assumptions are based on CPI reverting to the government target of 2% and that RPI is approximately 1% higher.

In response to this change various pensioner groups including The Civil Service Pensioners’ Alliance have applied for a judicial review of the governments decision to change the measure used to increase pensions.

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