2022 RPI 12.6% Increase for section c members ?

[RB53]

Hi
apparently the September RPI rate is 12.6% so are section c pensioners getting that increase next April ???

[RobertT]

That would be great, but RM pension increases are capped at 5%.

[RB53]

Thanks for this

[hermon]

A 7.6% real terms reduction.
Someone who is good at maths may be able to work out the point at which our final salary becomes worthless if inflation continues at this rate (rpm 12.6%) ?

[hermon]

sorry rpi !

[freespeech]

A 7.6% real terms reduction.
Someone who is good at maths may be able to work out the point at which our final salary becomes worthless if inflation continues at this rate (rpm 12.6%) ?

It's there already to a degree given it was based on a final salary from a decade ago.

[milly]

A 7.6% real terms reduction.
Someone who is good at maths may be able to work out the point at which our final salary becomes worthless if inflation continues at this rate (rpm 12.6%) ?

Your Pension would half in 10 years but in reality it would halve sooner than that as the government has a tendency to skew the data to make inflation appear lower than it actually is.
There's plenty of optimists on this Forum so I'm sure they can reassure you that this can't happen .

[RobertT]

There won't be many people who can convince you that inflation won't be having a detrimental effect on your pension. Just as it has on your wages, savings, etc.
I'm certainly not going to try!

With money held in an ISA, DC pension, etc the individual has the opportunity to make up for any losses by sitting tight and riding out the storm, and history tells us that over the long term, that is the correct thing to do.
Changing investment strategy is obviously also an option, but time in the market is usually better than trying to time the market.

DB pensions are different because they grow in a different way and are as good as guaranteed. First by the scheme itself, then the sponsoring employer and finally by the Pension Protection Fund.

However they are limited when it comes to annual inflationary increases, as they don't rigidly follow inflation and are capped at a certain rate. That is usually 5%, but can be lower.
I suspect if they were to try and follow inflation at current rates, some would end up in trouble.

The Bank of England are predicting a peak of 11% for the headline rate of CPI and then a drop to near their target of 2% in two years time. But it's very difficult to predict.

Their usual reply to high inflation is to raise interest rates, which they've already done and will probably continue to do. The idea being it will encourage people to save rather than spend and if they're spending less, then inflation will come down.

The only problem with that is that the costs of many basic things, such as food and energy are sky high, and we obviously all need to eat and keep warm. That's going on all over the world due to Ukraine, etc and the BofE have no control over what happens in other countries.

Higher interest rates also have a negative impact on mortgage rates, borrowing etc.

So in the short term we haven't got a huge amount of control over the effect inflation is having on our DB pension benefits. All we can do is hope rates fall relatively quickly.
We basically have to suck it up!

I see no reason to forgo any DB scheme that's on offer, either by failing to join or CETVing out. For me, nothing will beat the guaranteed income for life(plus spouses benefits) you get from a such a pension and should always form the basis of your retirement income if it's possible and available.
Although having other investments tucked away to supplement your RM pension is always a good idea.


*It's worth noting that the rate of inflation is an average figure, and rises and falls in the costs of the individual items in the 'basket of goods' they use, can affect people differently depending on their specific expenditure.