Currently those people who are lucky enough to belong to a final salary pension scheme have their benefits in payment increased by the Retail Price Index (RPI).  The government has indicated that from Jamuary these increases could use the Consumer Price Index (CPI) instead.  The current figure for RPI is 5.1% whereas the CPI is 3.4%. 

Hargreaves Landsdown have worked out that someone earning £100,000 a year wiht 30 years service could expect to have a pension of £50,000 at 65.  With RPI in force this would rise to £97,370 by the age of 85.  With CPI this would be £84,970.   A reduction of over £12,000. To counteract this people need to save more, possibly outside pensions.

The ruling will also affect those who have deferred pension benefits because the increases in their deferred beenfits will be correspondingly lower.