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Social Security

When we produced the initial impact assessment on the changes, we divided schemes into four groups according to whether they revalued by RPI or CPI and whether they indexed by RPI or CPI. We found that a good deal of revaluation was done in terms of the revaluation order and hence would go to CPI, but that a lot of the indexation was in terms of RPI. We have gone out into the field and talked to those administrating schemes, and we are revising our estimates of the proportion that will respond to this change. The hon. Lady brings me on to the point that I wanted to make: some schemes have RPI hard-wired—for want of a better phrase—into them. We faced the difficult decision of whether to override that and put CPI in or whether to say, ““Rules is rules, scheme promises are scheme promises,”” and keep it how it was. We announced at the start of December that we felt that people's confidence in pensions is important, and therefore that we would not override scheme rules. If someone has joined a private sector occupational scheme that has RPI in the scheme rules, we will not override it. Obviously, each scheme will make its own decision on how to respond if they have the flexibility to do so, but many schemes do not have that, and therefore will not make the change. We will publish updated estimates of the proportions.