Editorial: Baby boomers keep their dream

For many it is a point of principle to stick up for what they feel they were promised, even if this was merely an implied promise. The downside is for companies that were hoping for some relief in the size of their pension obligations from a change in the composition of RPI. For some, it could mean closure, sale or slow decline. For others it just means they have to pedal harder. Such a ball and chain for UK business affects us all, but it hits the young hardest in terms of employment, salaries and economic growth.

The reaction of the pensions industry to the decision from the National Statistician to leave RPI as it is has been to uniformly declare it simply good news for pensioners and bad news for employers. There seems to be a glaring oversight here. This news, and any other developments that increase or maintain the cost of past promises for defined benefit pensions, hardly seems fair for a younger, less fortunate workforce who is receiving, at best, half the employer contributions being made into their own retirement plans. It is reminiscent of the way the house price boom of the early 2000s was uniformly portrayed as a positive trend, with no focus on what the downsides might be for those who arrived late to the party.

There is an image problem here, that the UK pensions industry might be perceived as only working for the benefit of the baby boom generation born between 1945-1965, which David Willetts described in his book The Pinch as “the biggest, richest generation that Britain has ever known”.