LCP: Wholesale shift to RPIJ will cut FTSE100 deficits by £20bn
If all the FTSE100 companies still using the RPI inflation measure in their pension schemes were to move to using RPIJ, the combined pension deficit could fall by up to £20bn, LCP says.
The consultant - which published its annual Accounting for Pensions survey today - said RPIJ, which was granted the status of ‘national statistic' in November last year, will increase the opportunity for companies to consider which measure of inflation should be used in their pension schemes and the potential savings from making a change.
Due to the way the indices are constructed, LCP expects increases in RPIJ to be consistently lower than increases in RPI - with an average expected difference in the region of 0.7% pa.
It says if schemes are able to switch from the RPI measure to the RPIJ index, employers would benefit from an immediate reduction in pension cost - albeit at the expense of pension scheme members who would be left with lower expected future pensions.
LCP says if all of the FTSE 100 companies that still use RPI inflation in their pension schemes were to move to using RPIJ, the combined pension deficit could fall by up to £20bn.
Jonathan Stapleton analyses the full LCP report in the latest PP issue (PP Online 6 August)
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