Pension Increase CPI

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timberman

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I have a deferred pension which is due to increase each year by CPI …I asked for a value in February but I was told CPI for 2023 wasn’t known or applied yet ?? … when or what is cpi for 2023 and when is that reflected in deferred pensions ?
 
timberman said:
when or what is cpi for 2023
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The Department of Public Expenditure and Reform informed the public sector pension administrators on 31 Jan 2024 that CPI for 2023 was 4.60% (Ref 1) and to apply accordingly to any accrued pension benefits (in the single scheme) built up as at end-2022.

If your pension scheme is applying CPI-based increases to deferred pension benefits, then they'll most likely be working to the same principle.

Ref: https://singlepensionscheme.gov.ie/wp-content/uploads/2024/03/DPENDR-SPSPS-CPI-Circular-2024-1.pdf
 
Deferred DB pensions typically limit the max annual increase to the CPI or 4% whichever is less. For my deferred DB pension the annual benefit statement for 2023 is dated for Apr 2024 but only published on the Mercer online portal in Dec 2024.
 
Thanks for your replies.. 4% I’d be thinking so …
PS how do i you give a thumbs up to a reply .. couldn’t see how to ?
 
timberman said:
PS how do i you give a thumbs up to a reply .. couldn’t see how to ?
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Do you see "Like ... Quote ... Reply" links on the bottom right corner of the post? If so, Like.

If not, it may be because new posters have some features limited for anti-spam reasons. A few more posts and you should be able to Like.
 
Dr Strangelove said:
It was 6.3%.

See here.
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A small clarification based on the link. The inflation rate, as measured by the CPI, was 6.3% in August 2023 but this had declined to 4.6% by year end.

Whereas the annual average percentage change in the consumer price Index over 2023 was indeed 6.3%.
 
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timberman said:
Thanks for your replies.. 4% I’d be thinking so …
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Yes. Your scheme will most likely have a capped rate around that level.

This thread could get confusing as differing inflation figures have been posited above.

The important thing from your point of view is what is the "relevant CPI change" as used by your scheme.

Whether 4.60% or 6.30% is the applicable rate to your scheme is moot as your scheme's rate is probably capped given the likelihood that the relevant CPI change for 2023 is higher than the likely cap.

However, you can probably figure out what relevant CPI rate your scheme will use for 2023 (before application of any cap) by looking at the rate your scheme applied in a year that the cap did not kick in and seeing does it correspond to the rate at the year end or the annual average percentage change.
 
Dr Strangelove said:
No clarification needed.

The question was in regard to the CPI for the full year, not specifically December.
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The clarification is - and seems to still be - you're quoting the wrong number. Which is is strange given you've provided a link to the CSO containing the correct value.

If you don't believe me you can work it out for yourself:
If a basket of goods an average person in Ireland typically consumes costs 94.8 in December 2022 and that same basket of goods costs 100 in December 2023 then the price increase over 2023 is {100/94.8}-1 = 4.6%

The number your are referencing is the average of the 12 annual percentage changes reported across each month in 2023. For the point of this thread that value is irrelevant. The underlying calculations include a lot of 2022 price increases. Take January 2023, the annual increase ( Jan 2022 - Jan 2023) was 7.7%. But most of the increase was recorded in 2022. Prices between end December 2022 and end January 2023 actually declined marginally - but no one should spend too much time looking at monthly changes.

Not really sure why the CSO publish this as it leads to the type of confusion above.

So to be clear the annual rate of inflation in 2023 was 4.6% and not 6.3%.
 
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@skrooge - your confidence exceeds your knowledge here!

You are quoting the index in December 2023 compared to the index in December 2022 which is indeed 4.6%.

I am quoting the average for the index across all 12 months in 2023 compared to the average for the index across all 12 months in 2022 which is 6.3%.

The latter is, in both common and technical parlance, the inflation rate for 2023. The CSO even says:

The annual average rate of inflation in 2023 was +6.3%. This compares to an increase of 7.8% for 2022 and an increase of 2.4% for 2021.
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The CSO quotes both monthly and annual rates as both are relevant for different purposes.

A lot of this is moot until the OP clarifies what the wording of their product is.
 
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Dr Strangelove said:
You are quoting the index in December 2023 compared to the index in December 2022 which is 4.6%.

I am quoting the average for the index across all 12 months in 2023 compared to the average for the index across all 12 months in 2022 which is 6.3%.

The latter is, in both common and technical parlance, the inflation rate for 2023. The CSO even says:



The CSO quotes both monthly and annual as both are relevant for different purposes.

A lot of this is moot until the OP clarifies what the wording of their product is.
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The level of prices at the end 2022 was 94.8. the level of prices at the end of 2023 was 100. The difference between the two is how much prices have increased over that time i.e., inflation attributable to 2023. In percentage terms that change is 4.6%

Price increases between January 2022-December 2022 are not relevant for calculating inflation in 2023. They do however appear in the figure you reference.

Very fair point on the wording of the product.
 
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skrooge said:
The level of prices at the end 2022 was 94.8. the level of prices at the end of 2023 was 100. The difference between the two is how much prices have increased over that time i.e., inflation attributable to 2023. In percentage terms that change is 4.6%
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There is no dispute about this.

Both in technical and layman’s terms, the inflation rate for 2023 is a comparison for the average of the index for all months in 2023 with the average of the index for all months in 2022. Not a comparison of the index level in the last month in each year.

I hesitate to argue from authority but I have spent several thousand hours of my life around this concept. You can spend as long as you like reading up on this and you won’t find anything to contradict me.
 
Thought experiment.
CPI for first 6 months of 2022 is 100. CPI jumps to 1,000 in July 2022 and stays there ever since. What was the actual inflation experienced in 2023?
 
@Duke of Marmalade

CPI averages 550 in 2022
CPI averages 1000 in 2023

Inflation for 2023 is 82%.

I’m not sure if this quite answers your question as “actual inflation experienced “ is not a technical concept.
 
Dr Strangelove said:
Both in technical and layman’s terms...
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The question was asked by a layman (albeit an aristocrat);)
I agree that technically is not the same as experienced. I myself have been just informed of my 2023/2024 increase. It is 3.4% and as with previous years it is based on the CPI figure published in February. I don't think I was ever told that would be the rule, but the Trustees decided on something. Over time the technical definition and the experienced inflation converge provided the Trustees stick to the same technical rule.
 
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