Why does the ǯ¶â ÊÝ¸î ´ð¶â only give pensioners a 2.5% raise? Steve Webb replies
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Why only a 2.5% raise? l'm sure everyone could do with a bigger Áý²Ã¤¹¤ë
As a ¡ÊÊÛ¸î»Î¤Î¡Ë°ÍÍê¿Í of the ǯ¶â ÊÝ¸î ´ð¶â I have a comment to make about their generosity (or ¤µ¤â¤Ê¤±¤ì¤Ð).
I know they do a good ¿¦¶È; I paid into a company ·×²è¡¿±¢ËÅ for 20 years before it was frozen and 10 years later the company went into ¹ÔÀ¯ (voluntary I think) when I still had three years left before I could draw the ÌÀ¸À¤¹¤ë¡¿¸øɽ¤¹¤ë ǯ¶â.
Now that I am receiving my ǯ¶â through the PPF only about half of it is º÷°úd for ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó because of the change in »ÙÇÛ¤¹¤ës in 1997.
ln a ºÇ¶á¤Î letter they said that although they have billions of ³¤±¤¶¤Þ¤ËÌԷ⤹¤ës of »ñ»ºs they have decided not to Áý²Ã¤¹¤ë the indexable part of the ǯ¶â by more than the 2.5 per cent Í׵᤹¤ëd by the »ÙÇÛ¤¹¤ës.
To me this seems rather ÉÔ¸øÊ¿¤Ê. l'm sure everyone could do with a bigger Áý²Ã¤¹¤ë because it is ¸½¼Â¤Ë ¸º¾¯¡Ê¤¹¤ë¡Ëing in rea l ¾ò·ï.
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Steve Webb replies: The ºÇ¶á¤Î »¦Åþ¤¹¤ë in ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó has understandably led to a ¿·¤¿¤Ë¤¹¤ëd ¾ÇÅÀ¡Ê¤ò¹ç¤ï¤»¤ë¡Ë on the »ÙÇÛ¤¹¤ës which ¼£¤á¤ë¡¿Åý¼£¤¹¤ë how much our ǯ¶âs go up by each year.
When ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó is low, people may manage even if their ǯ¶â goes up by a lower ¿Íʪ¡¿»Ñ¡¿¿ô»ú, but when we see ÆóÎÝÂÇ-digit ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó this can really dig into our ´ð½à of living.
As you know, the ǯ¶â ÊÝ¸î ´ð¶â ¶¡µë¤¹¤ës a ¼êÃÊ of Êݸî to those who were in company ǯ¶â ·×²è¡¿±¢ËÅs where the sponsoring ¸ÛÍÑ¼Ô who stood behind their ·×²è¡¿±¢ËÅ went ÇË»º¤·¤¿¡¿¡Ê·Ù»¡¤¬¡Ë¼êÆþ¤ì¤¹¤ë.
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There are ¤µ¤Þ¤¶¤Þ¤Ê º·É¡Ê¤¹¤ë¡Ë¡¦ÅÀs in which the Êä½þ¡Ê¶â¡Ë ¶¡µë¤¹¤ëd by the PPF may Íî¤Á¤ë short of the actual ǯ¶â you would have received had your ·×²è¡¿±¢ËÅ continued.
The most obvious of these is that people who were under ǯ¶â age when the ¸ÛÍÑ¼Ô went ÇË»º¤·¤¿¡¿¡Ê·Ù»¡¤¬¡Ë¼êÆþ¤ì¤¹¤ë will have Êä½þ¡Ê¶â¡Ë based on 90 per cent of their ǯ¶â rather than 100 per cent for those who were over ǯ¶â age.
But a ¤¤¤Ã¤½¤¦¾¯¤Ê¤¯ obvious À©¸Â on PPF Êä½þ¡Ê¶â¡Ë is the fact that ǯ¼¡¤Î Áý²Ã¤¹¤ës in º·É¡Ê¤¹¤ë¡Ë¡¦ÅÀ of ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó are ¸Â¤é¤ì¤¿¡¿Î©·ûŪ¤Ê and may be ¤¤¤Ã¤½¤¦¾¯¤Ê¤¯ generous than the Áý²Ã¤¹¤ës you would have received if your ·×²è¡¿±¢ËÅ had continued.
For example, ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó Áý²Ã¤¹¤ës paid by the PPF use the ¾ÃÈñ¼Ô Prices º÷°ú (¾ÃÈñ¼Ôʪ²Á»Ø¿ô) as the ¼êÃÊ of ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó È¿¤·¤Æ many company ǯ¶â ·×²è¡¿±¢ËÅs »Ùʧ¤¦¡¿Ä¶â Áý²Ã¤¹¤ës based on the (usually higher) ¾®Çä Prices º÷°ú (RPI).
In ¿·µ¬²ÃÆþ to this, as you say, for ǯ¶âs in »Ùʧ¤¤¡Ê³Û¡Ë, service in a ǯ¶â ·×²è¡¿±¢ËÅ before 1997 attracts no ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó Êݸî at all, whilst ÃÏ°Ì¡¤Ç¤Ì¿¤¹¤ë 1997 service gets indexation only up to a cap of 2.5 per cent.
This is an important À©¸Â, and the PPF website ¼¨¤¹s that in 10 of the last 18 years that 2.5 per cent cap has been ŬÍѤ¹¤ëd:?ǯ¶â ÊÝ¸î ´ð¶â - Will my ǯ¶â Áý²Ã¤¹¤ë??
The ÌäÂ꡿ȯ¹Ô¤¹¤ë of PPF Áý²Ã¤¹¤ës often Íî¤Á¤ëing below ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó is one that has been rumbling on for a long time. Indeed, I wrote a column about this very ÌäÂ꡿ȯ¹Ô¤¹¤ë more than three years ago: Why don't PPF »Ùʧ¤¤¡Ê³Û¡Ës ever rise with ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó?
However, there are two ¿äÏÀ¤¹¤ë¡¿Íýͳs why the political µ¤²¹ on this ÌäÂ꡿ȯ¹Ô¤¹¤ë has been turned up recently.
The first, as ¸ø¼°Ê¸½ñ¡¤Ç§¤á¤ëd earlier, is that a Ĺ°ú¤«¤»¤ëd period of high ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó has made these ¸Â¤é¤ì¤¿¡¿Î©·ûŪ¤Ê ǯ¼¡¤Î Áý²Ã¤¹¤ës much more painful.
The second is ¸½¼Â¤Ë a byproduct of the PPF¡Çs success.
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The ºâÀ¯¾å¤Î position of the PPF has ²þÁ±¤¹¤ëd markedly in ºÇ¶á¤Î years. In part this È¿±Ç¤¹¤ës things like the Áý²Ã¤¹¤ë in Íø±×¡¿¶½Ì£ Ψs which has ²þÁ±¤¹¤ëd the ºâÀ¯¾å¤Î position of company ǯ¶â ·×²è¡¿±¢ËÅs and of the PPF.
But the PPF has also ãÀ®¤¹¤ëd good Åê»ñ returns (¤½¤Î°Ù¤Ë ¾å¤²¤ëing the »ñ»ºs of the PPF) and has seen lower than ¿äÄꤹ¤ë¡¿Í½ÁÛ¤¹¤ëd ¡Ê¿ÍÌ¿¤Ê¤É¤ò¡ËÃ¥¤¦¡¤¼çÄ¥¤¹¤ës (¤½¤Î°Ù¤Ë ¸º¤º¤ëing the ¿äÄꤹ¤ë¡¿Í½ÁÛ¤¹¤ëd »Ù½Ðs).
Although the PPF does not like to talk about having a ¡Æ¹õ»ú¡¿²á¾ê¡Ç, its ºÇ¿·¤Î ǯ¼¡¤Î Êó¹ð¡Ê¤¹¤ë¡Ë¡¿²±Â¬ shows that PPF has ¡Æreserves¡Ç of just over ¡ò12billion: ǯ¶â ÊÝ¸î ´ð¶â ǯ¼¡¤Î Êó¹ð¡Ê¤¹¤ë¡Ë¡¿²±Â¬ and accounts 2022/23.
This could be thought of as a ¡Æ¾×·â¤òϤ餲¤ë¤â¤Î¡Ç over and above the money that PPF ¿äÄꤹ¤ë¡¿Í½ÁÛ¤¹¤ës to have to spend ²ñ¹ç the µÁ̳¡¿ÉéºÄs which it has taken on to date and will take on in the ̤Íè.
This large ¿Íʪ¡¿»Ñ¡¿¿ô»ú does, of course, raise the question as to whether some of it could be used up in »Ùʧ¤¦¡¿Ä¶âing bigger ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó Áý²Ã¤¹¤ës to the nearly 200,000 people who ¸½ºß¡¿°ìÈÌ¤Ë receive PPF Êä½þ¡Ê¶â¡Ë.
This ÌäÂ꡿ȯ¹Ô¤¹¤ë is ÆÃ¤Ë ±éÀâ¡Ê¤¹¤ë¡Ë¡¿½»½êd in its ºÇ¿·¤Î ǯ¼¡¤Î Êó¹ð¡Ê¤¹¤ë¡Ë¡¿²±Â¬ which explains that although PPF is bound by ˡΧ ¡¼¤Ë´Ø¤·¤Æ¡¿¡¼¤ÎÅÀ¤Çs of the »ÙÇÛ¤¹¤ës on pre 1997 service, the organisation can be more generous on ÃÏ°Ì¡¤Ç¤Ì¿¤¹¤ë 1997 service if it feels this is appropriate.
The Êó¹ð¡Ê¤¹¤ë¡Ë¡¿²±Â¬ says that the Board of the PPF looked at a ÈÏ°Ï of factors, ´Þ¤àing the fact that they only had the ÎÏ¡¿¶¯ÎϤˤ¹¤ë to change things with regard to ÃÏ°Ì¡¤Ç¤Ì¿¤¹¤ë 1997 service (and not the bigger squeeze on pre 1997 service) and the fact that the À¯ÉÜ itself had not ¼¨¤¹d any change in À¯ºö. But in the end they decided to make no change at this ¹Ô¤¦¡¿³«ºÅ¤¹¤ë¡¿Ãʳ¬.
However, the Work and ǯ¶âs Select °Ñ°÷²ñ of the House of ¤¢¤ê¤Õ¤ì¤¿s has been looking into this »öÊÁ and took oral ¾Úµò from the (then) ÂçÅýÎÎ of the PPF, Oliver Morley in November.
You can read a transcript of the ¾Úµò ³«²ñ¡¿³«Äî¡¿²ñ´ü here: Work and ǯ¶âs °Ñ°÷²ñ: Defined Íø±× ǯ¶â ·×²è¡¿±¢ËÅs
They also heard Âåɽs from pensioners unhappy at the ¸Â¤é¤ì¤¿¡¿Î©·ûŪ¤Ê level of ¥¤¥ó¥Õ¥ì¡¼¥·¥ç¥ó Êݸî.
The PPF¡Çs position as »Ï¤á¤ë¡¤·è¤á¤ë out by its Ĺ¡¤»ØƳ¼Ô (n)Ìò°÷¡¿(a)¼¹¹ÔÎϤΤ¢¤ë is that ºÇ½ªÅª¤Ë it is a »öÊÁ for À¯¼£²È¡¤À¯¼£²°s to make a ·èÄ꡿ȽÄ꾡¤Á¡Ê¤¹¤ë¡Ë about the »ÙÇÛ¤¹¤ës around PPF Êä½þ¡Ê¶â¡Ë.
The PPF was created by an ¹Ô°Ù¡¿Ë¡Îá¡¿¹ÔÆ°¤¹¤ë of µÄ²ñ which »Ï¤á¤ë¡¤·è¤á¤ë »ÙÇÛ¤¹¤ës and ¸Â³¦s as to what PPF can and cannot do, and his ¸«²ò¡Ê¤ò¤È¤ë¡Ë was that any change to those »ÙÇÛ¤¹¤ës should also be ·èÄꤹ¤ëd by µÄ²ñ.
But, perhaps surprisingly, he did however Äɲ乤ë that, with regard to the ·çÇ¡¡Ê¤¹¤ë¡Ë of indexation on pre-1997 service, he felt that ¡Æthere is a good »öÎã¡¿´µ¼Ô on ¸øÀµ¡¤ÉáÄ̳ô¼ç¸¢ grounds¡Ç for taking ³èÆ°¡¿ÀïÆ®.
In ¿·µ¬²ÃÆþ, the new ǯ¶âs Âç¿Ã, Paul Maynard MP, subsequently told the °Ñ°÷²ñ he had asked civil servants to look afresh at the whole ÌäÂ꡿ȯ¹Ô¤¹¤ë of PPF indexation.
In short therefore, whether or not PPF Êä½þ¡Ê¶â¡Ë is ²þÁ±¤¹¤ëd in ̤Íè is likely to depend ¤Þ¤ºÂè°ì¤Ë¡¿ËÜÍè not on the PPF and its board but on the ·èÄ꡿ȽÄ꾡¤Á¡Ê¤¹¤ë¡Ës of ¸½ºß¤Î and ̤Íè Âç¿Ãs.
But with an Áªµó ͽÄê in ¤¤¤Ã¤½¤¦¾¯¤Ê¤¯ than a year, this may be an ÌäÂ꡿ȯ¹Ô¤¹¤ë where those ±Æ¶Á¤¹¤ë¡¿´¶¾ðd will Áܤ·½Ð¤¹ to bring °µÎÏ to get the »ÙÇÛ¤¹¤ës changed.