^{Friday 9th July 2010}

Plans to change the measure of inflation to which pension payments are calculated could mean that millions of private sector pension holders could see their income cut.

Pensions minister, Steve Webb, said that there were plans that could see pensions linked to the consumer price index (CPI) rather than the retail price index RPI). The CPI is usually lower than the RPI, which includes housing costs such as mortgage interest payments whereas the CPI does not.

Experts warned that this could reduce company pension liabilities by 10% or about £100bn and said that pensioners retirement income could be hit by up to 25%.

George Osborne outlined in last month’s emergency budget that public sector pension could be linked the CPI in the future which would save the UK government millions each year.

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