APS & NAPS Trustees respond to RPI Consultation

The government and UK Statistics Authority are consulting on UKSA’s proposal to address what they consider to be the shortcomings of the Retail Prices Index. The consultation closes at 11:59pm on 21st August.

The consultation assumes that RPI is to be aligned with CPIH (consumer prices index + housing costs) so is consulting on how that alignment might be achieved and when it might take place, sometime between 2025 or 2030.

Both the APS Trustee and the NAPS Trustee have responded to the consultation and their responses are now available on the BA Pensions website:

The view of both Trustees is that the proposals contained in the consultation would have serious detrimental effects on the schemes and on members,  and would represent a transfer of wealth away from pensioners.  Their expressed preference is for RPI to continue and if not, that a replacement index be implemented of CPIH plus an appropriate margin that reflects RPI.   Their preferred timing of the change is as late as possible in 2030.

ABAP supports this view and we applaud the Trustee’s decision to publish their responses on this very important consultation.

Both schemes have made investments in government issued index linked gilts (ILGs) on an RPI basis as a hedge against CPI inflation in line with investment guidance issued by The Pensions Regulator in 2019 to trustees of defined benefit pension schemes.  Moving these to CPI would reduce the funding position of the schemes, weakening APS and increasing the deficit in NAPS.

The proposals would not just affect APS & NAPS but would have a wider effect throughout the UK defined benefit pension industry.