Published On: Wed, May 11th, 2022

Pensioners face forfeiting £7,000 – ‘Gold-plated’ pensions ‘very similar’ to state pension | Personal Finance | Finance


On BBC MoneyBox, Richard was concerned about the cap on his pension not beating inflation. He said: “I have final salary pension which is about £9,000 a year which I’ve taken early.

“It is capped at five percent a year. The plan of retiring early was effectively to have nine months off in the year and work three months over the winter months.

“But there’s an element of having to rethink that now because if the pension is not going to be worth anything like it was then clearly I’m going to have to work throughout the whole year, even if it is on a part time basis.

“So it’s quite an alteration to the plan really.”

Final salary pensions are known as ‘Gold-plated’ pensions.

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These are very similar to state pension in the amount that people get paid.

Gold plated pensions are paid by a company to retired employees which is a proportion of their salary and is guaranteed to rise with inflation.

However this guarantee won’t rise by the level predicted by the Bank of England which could be 10 percent by the end of the year.

This is because there is a cap on the increase that they will pay.

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These caps essentially reduce the amount of pension that one could get.

Mr Leeks research found that there are about 4.2 million pensioners, the average age is about 70.

He said: “The average pension is about £8,800 per member – which is very similar to the state pension – very comparable.

“If we put inflation up to 10 percent and we allow for all of those historic caps and different service in the different windows, that’s where we got the figure where we think 10 percent inflation would mean that people have forfeited £400 per annum of pension.

“So if inflation does hit 10 percent, they would be getting £400 more than they actually will be getting and this could last over their lifetime, not just for the year.”

Mr Leeks continued: “If we allow for the fact that they would have been paid for 17 or 18 years that’s where we get a sort of cumulative impact of £7,000.”

BBC Money Box is available on BBC Sounds.



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