Bank of England Pension Fund Ignores CPI

Published by Graham Tomlin for Credit Union Solutions Ltd in Central Government and also in Education, Health, Housing, Local Government

The now fully funded Bank of England pension fund has ignored the Chancellors calls for public sector restraint in annual pension reviews by sticking with RPI and snubbing CPI.

I say now fully funded because the taxpayer needed to make a generous donation of £42.5 Million to ensure assets and liabilities matched. As the Governor moved into his second 5 year term it was disclosed that his pension on retirement will be just short of £200,000 per year generously uplifted each year by RPI.

What is unclear is the mechanism whereby other public sector workers were forced into accepting CPI annual increases while the Bank of England pension fund got away with sticking with RPI.

This is a major snub to George Osborne and Steve Webb’s attack on public sector pensions when the Bank of England pension trustees not only ask for and get paid £42.5M to meet their shortfall but then fritter it away on RPI increases.

This will almost certainly add greater pressure on trustees at places like British Airways where having paid RPI increases since the pension funds came into being has now adopted CPI. This resulted in a transfer of benefit from BA pensioners to BA shareholders of £770 Million.

What further rankles is that BA has had its fingers in the pie before by taking pension holidays when the fund was in surplus and by transferring cash out causing it to be slightly less than fully funded.

Further cause for concern is that BA required staff to join their pension funds and quoted RPI uplifts annually as being what staff could expect upon retirement. This may be construed as pension miss-selling so expect fireworks when the BA pensioners meeting on 11^th July at Ascot racecourse is held.