Insight Investment

A general call to action

Dear stakeholders

As an investment manager we feel we have a responsibility to seek your support with an issue that we believe may adversely affect both asset owners, such as pension funds, insurers, and millions of pensioners in the UK: namely the proposal to reform the Retail Prices Index (RPI) to align with the Consumer Prices Index including owner occupiers’ housing costs (CPIH).

If RPI is simply aligned with CPIH then, all else being equal, we beleive that this would reduce the pension fund benefits received by millions of people in this country and may result in a transfer of wealth from index-linked gilt holders to the UK government of c.£100bn.

It does not have to happen this way.

A fair and equitable outcome can be achieved for everyone if RPI is aligned with CPIH plus an appropriate margin to ensure that there are no resultant losers.

The Government announced that it will launch a consultation on the alignment of RPI with CPIH on 11 March 2020.

We urge all UK pension funds, insurers, advisers and asset managers to engage with policymakers now to shape the upcoming consultation and to participate, once published, to ensure that it:

1. provides an opportunity for all the relevant stakeholders to debate whether the change should proceed; and
2. encourages debate on equitable solutions for holders of contractual RPI-linked payments such aspension fund members and index-linked investors, to achieve an outcome which avoidsan unintentional wealth transfer.

With your help, we can protect asset values and the retirement income that millions of people depend on now and for decades to come.

Yours faithfully and with great expectations,

Insight Investment

Call: 0207 321 1118
E-mail: enquiries@insightinvestment.com