Thousands of retirees warned they could lose BILLIONS from pension changes
Government changes to how pensions are calculated at BT, Marks & Spencer and Ford mean thousands of pensioners are lining up for lower payouts, with women being hit the hardest
Image: Getty Images)
Retirees working for companies like BT, Marks & Spencer and Ford could lose billions if the government’s pension changes go through, experts warn.
The problem is that almost 450,000 people in these companies’ pension schemes with £83bn in their pension pots will have lower pensions from 2030 onwards.
The government has already said it has no plans to compensate losers.
Workers in many pension schemes have pension pots that increase each year in line with the Retail Price Index (RPI) – one of two main measures of inflation.
The RPI is almost always higher than its main competitor, consumer price inflation (CPI).
But the government wants to change how the RPI is calculated and make it more consistent with the CPI.
Are you affected by these changes? Let us know: firstname.lastname@example.org
SOPA Images/LightRocket via Getty Images)
However, according to the BT, M&S and Ford UK pension schemes, this will wipe out billions of pounds from defined pension pots for affected workers.
The average male worker aged 65 with a pension affected by the change will see annual pension payments fall from £6,300 a year to £5,500 a year, according to the Pensions Policy Institute.
For women the figure is £6,200 falling to £5,300.
Three pension schemes filed suit against the government and the UK Statistics Office (UKSA) in the High Court this week.
A decision is expected in about three months.
The High Court heard that anyone in a pension scheme where increases are linked to RPI will be affected by the changes.
Affected pensioners will see their pensions cut by 4% to 9% – with women being hit hardest as they tend to live longer.
Around 82,000 BT pensioners will lose an average of £34,000 each, the court says – wiping out more than £2billion in pension funds.
The changes are scheduled to take effect from February 2030.
BT, Ford UK, M&S and HM Treasury were asked to comment.
A spokesman for HM Treasury declined to comment as the case is ongoing.
However, the argument brought to court by the Chancellor and the UKSA stated that RPI “was never the subject of any set or unchanging methodology”.
The Federal Chancellor was “expressly informed” that the decision would be made by pensioners, but that he had nevertheless decided to do so.
“The decision is final,” said the chancellor in court documents.
A joint statement from BT, Ford and M&S pension schemes said: “It is estimated that over 10 million pensioners through no fault of their own will be poorer in retirement either due to lower payments or lower transfer values replacing RPI with CPIH.
“Women will suffer the most from this change as they typically live longer.”
However, the lowering of the RPI is good news for students and commuters.
That’s because the government ties things like fare increases and student loan repayments to RPI.
Increases in a number of taxes are also linked to RPI – including road tax, air passenger tax and fuel tax – and can potentially generate savings there.
Many cell phone contracts also allow “inflation-linked” increases each year – meaning people could save money that way too.
What is currently associated with RPI?
final salary pension payments
Index-Linked Annuity Income
Income from some index-linked bonds
Regulated fare increases (and collective bargaining for rail workers)
Price increases for mobile phone tariffs (maximum permissible increase without the right to premature contract termination)
Motor vehicle tax (better known as motor vehicle tax)
Air passenger tax increases
Tobacco and alcohol taxes are increasing
Interest on student loans
https://www.mirror.co.uk/money/thousands-pensioners-warned-could-lose-27308965 Thousands of retirees warned they could lose BILLIONS from pension changes