Government Won The Pension Battle

Last December, it was refused by three appeal judges to overturn a high court ruling which was in favor of governments approach

. The case was about Work and Pension Secretary lain Duncan Smiths judgment about using the consumer price index (CPI) in place of normally faster-rising retail price index (RPI) for measuring the price increasing which influence pension upgrades. According to the unions, the value of pensions cut will be seen by CPIP up to 20pc over a normal retirement that costs every worker who is affected thousands of pounds. Government was accused by them of unlawfully attempting to decrease pension prices in the battle for cutting the financial deficit of UK. It is expected to have the change from RPI to CPI to save almost 6bn a year by 2014.

But, according to the court, if there were two different indexes then there is a provision to use any of them for the purpose of up rating public sector pensions. Government was permitted to take into account the effect of national economy at the time of selecting between them.

Lord Neuberger, one of the three judges and the Master of the Rolls said that the government clearly believed that the position of the national economy was not good. The saving which could be made properly should be made. He added in his statement that it is a matter for the Secretary of State which index he selects.

The judge further stated that the RPI which is the driving force behind the CPI is required to fill the black hole. The CPI was also chosen, because it was believed to be an inherently more satisfactory index than RPI for up rating purposes". According to Ros Altmann who is the director of Saga, the over-50s company the government must be relieved which means lower pensions all round in the coming time. Apply with 12 month loans no credit check and get funds needed by you in quick time.

There are some difference in the views of CPI and RPI. The expenditure of certain households is excluded by RPI which include pensioner households also. Same items are not included in the two indexes. On contrary to RPI, TV license costs or housing costs are not included in CPI, but university costs are included in the TV license costs. Moreover, two different mathematical ways are used in the two indexes for coming up with an average figure for price rises with every category of products and services.

by: John Harris

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