Real value of States pension will be retained

The pension will keep its real value, which is currently £204.45 per week.

At the October meeting, the States agreed that the pension should be increased each year by the increase in RPIX (cost of living) plus one third of the difference between the cost of living and the increase in average earnings.

For example, if the cost of living was 3% and the increase in average earnings was 4%, the pension would increase by 3.33%.

As long as the pension keeps up with the cost of living, it means that it has the same purchasing power. You can buy the same amount of food, clothes, fuel, household goods etc. that make up the basket of goods in the retail prices index.

If the pension does not keep up with average earnings, it means that although your pension still buys the same amount of goods, it will be a lower level of replacement of what the average earner was receiving in wages before retiring. This is what you were referring to in your column, but it was incorrect to describe this as a decline in real value.

I accept that these distinctions are hard to convey in just a few words.

I wish to restate the fact that the States have decided that the pension should increase by the cost of living, and a little bit more.

This decision goes alongside a proposal to increase retirement savings through having second pensions, on top of old age pension.

Those proposals have been published and will be debated by the States in February.

DEPUTY ALLISTER LANGLOIS,

Social Security minister.