Negative inflation applied to active pension accounts from April 2016

A key feature of the change in the Local Government Pension Scheme from Final Salary to Career Average from April 2014 was that each year the cost of living is factored into members’ pension accounts so that over the years a current value is reflected.

The annual cost of living revaluation from 1 April 2014 is based on the Consumer Prices Index (CPI) set by the Government in September of the previous year.

However the CPI rate at September 2015 was -0.1% (a negative inflation rate). The Public Services Act 2013 set out that when such an event occurs the matter has to go before Parliament for ratification.

On 23 March 2016 the Government confirmed that active pension accounts for the year 1 April 2015 to 31 March 2016 will be decreased by 0.1% from 1 April 2016.

As this applies from 1 April 2016 the effects of this reduction will be shown on members’ annual pension benefit statement for 2016/17, rather than on statements for 2015/16, which will be sent to members by the end of August.

Those members who both left active membership and took payment of their pension in 2015/16 will not be affected by the reduction on 1 April 2016. 

Pensioners will not see an increase in their pension as the Pension Increase rate has been set at 0%.

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