In Reply to: Re: Impact of new PIP increase policy posted by Maurice on 09 February 2006 at 10:16:04:
Hi Maurice,
: I'm overstating the case - maybe I should have said it is preferable to evaluate in constant 2006 £'s. Take my numbers for 30yrs at 10% inflation, which show a reduction of £610k or -54.0% for the total pension received. This was calculated in the same way as you are doing - in nominal pounds. But that means some £'s in my £610k total are 2006 £'s, others are 2036 £'s which (after 30yrs of 10% inflation) are each worth only 6p in real terms (ie in today's 2006 purchasing power), with intermediate purchasing power for £'s in the intervening years. So both the £610k and the 54% reduction are not very meaningful or easy to interpret. Yes they do show the situation if you put all the £ coins you received in a drawer and counted them in 2036, but they don't show what happened to your pension in real terms - ie in terms of real 2006 purchasing power. If I'd calculated in constant 2006 £'s we'd be able to see what happened in terms of real 2006 purchasing power, which I find more meaningful.
I see your point. Initially I didn't do this as both schemes were subject to the same rate of inflation, I didn't think it mattered much. However in order to see what the totals and differences are in 'today's money', I've now re-worked my spreadsheet by decreasing each month's figures by 1/12th RPI of the previous month's figures.
The results show that over 15 years the difference is next to nothing. It's during the subsequent 15 years that the figures diverge but still only indicate a cost over this period of less than £9 pm at 3% RPI.
: Obviously at 3% inflation over 15yrs this is less of an issue, but it's still the case that the £s in your spreadsheet at the end of the 15yrs are only worth 64p in 2006 purchasing power, so your totals are a mix of different £'s in terms of "real worth".
True, but the differences still give an indication of whether the impact is major or not.
: I also did it the long way with each month in the 15 years separately calculated, then summing. And I did it the straightforward way, in "nominal" £'s not constant 2006 £'s. So I guess one (or both?) of our spreadsheets must be wrong. Not sure how we resolve this other than exchanging spreadsheets or for a 3rd person to post their results. I'll recheck mine, maybe you could do the same?
I've put my re-worked spreadsheet up on my web-site. Click on the link below to view it but, be warned, it's about 3.5MB long.
: I see Brian Marks says in another thread that AMIPP plan to publish something on this.
Thanks, I'll check it out.
: They haven't capped in the past.
Can't comment on this as I haven't seen the figures on pension increases when RPI was over 4%.
Bryan