The NAPF survey demonstrated that sixty four percent of Pension experts surveyed are calling for Government to enable all pension schemes to have the option of changing their existing rules on inflation, while 27 percent said it should not. The study also shows that six out of ten (61%) cannot currently make a switch, mainly because they have RPI indexation hard-wired into their pension scheme rules.

The research is published on the day Pensions Minister Steve Webb is due to launch a consultation on proposals to allow schemes to override their existing rules on inflation. The NAPF survey reflects some of the uncertainty that recent Government reforms have created for pension funds, and the need for a simple, clear and workable solution. Of the 162 respondents, half (48 percent) said they would make use of a new legal power to switch to CPI, while 21 percent said they would not. A third (31 percent) said they did not know.

Opinion was split over the level of trustee backing that should be needed to make use of any new legal ‘override’. 55 percent said the employer could make a switch with trustees’ consent, 29 percent said an ‘employer without trustees’ consent’, and 16 percent specified the trustees alone.

The survey is not a reflection of NAPF policy, but does highlight the complexity that the CPI/RPI move has uncovered. Joanne Segars, NAPF Chief Executive, said: “The question of whether a pension can move to CPI is making it very difficult for pension funds to plan ahead. “The Government has significantly underestimated the complexity of letting schemes switch their inflation measure. A seemingly simple change has become much trickier. “Six out of ten pension funds are hardwired with RPI at present, and around half would switch to CPI if the law allowed.

“But that does not mean all pension funds would opt for CPI, and opinion is split on whether employers alone should be able to authorise the switch. “Moving to CPI can give a pension fund some much-needed flexibility, but there are implications for current and future pensioners. Trustees and employers know that any switch must be handled carefully.”

In the Emergency Budget the Government moved the inflation indexation of state and public sector pensions from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI). In July, it announced that it would allow private sector schemes to follow suit. But many schemes found that the terms of their pension scheme specified RPI, and many in the pensions industry remain confused over which schemes can switch to CPI. The NAPF, the UK’s leading pensions voice, will be putting its views to the Government consultation on how pension schemes may amend their rules and switch to CPI, which was due to be announced today in the Commons by Steve Webb MP.