Small pension change 'will make a huge difference'

By Tom Farley, Mon 12 Jul 2010 - Published in Pensions

Linking pensions to the consumer prices index instead of the retail prices index will make a "significant change" to those in retirement, it has been suggested.

Last week, pensions minister Steve Webb announced that the measure by which payments through private sector final salary schemes are calculated will be changed, which could lead to millions of people with these products facing a reduced income.

Keith Churchouse, director of Churchouse Financial Planning, said that the change may not seem like a momentous one, but could cause problems for those who do not take it into account.

He noted that the amendment in the pension system will not make a great deal of difference to annual payments through final salary schemes, but these reduced payments will add up over the years to represent a "huge" difference in income.

"It is something that individual people will really need to start paying attention to early, because the reality is that they're going to see the purchasing benefits of their pensions going down over time," Mr Churchouse commented.

The expert also predicted that the government will soon look at how it can change public sector pension funds as it seeks to reduce the UK's spending deficit.

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