On the go: Unite, Britain’s biggest trade union, has refused to use the consumer price index as a measure of inflation in workforce negotiations, in response to the government’s mooted plans to scrap the retail price index in its current incarnation by 2030.
The government’s approach to inflation measures has a huge impact on defined benefit pensioners and annuity holders, whose promises are often uprated by reference to a particular index. Pension schemes holding inflation-linked assets will also be affected.
The union believes the CPIH – the housing variation of the CPI – is unfairly skewed against workers as it produces consistently lower figures, and is less representative of their expenditure patterns than the RPI. It is also creating its own new index, working with academics to formulate a Unite Bargaining Index for use by union negotiators.
Unite general secretary Len McCluskey said: “It is important that people understand what is at stake here. The RPI is not just a statistic. If we don’t fight this then millions of ordinary people will face cuts to their pay and pensions.” He added: “Whatever happens we will not let employers use this as an opportunity to short-change our members. There will be a choice; in negotiations you can use either RPI or a new Unite index. The CPIH will not be an option for collective bargaining.”
Projections by Insight Investment and Pensions Expert show that a member of a DB pension scheme who is retiring at age 65, on a starting income of £20,000, could lose £33,637 over the course of their retirement if the CPIH is applied to their RPI promises, as chancellor Sajid Javid indicated last week.
