How Mantle uses inflation assumptions to derive Section 52 revaluation

Mantle uses projection of indices for everything in a valuation. In this case Mantle projects the RPI and CPI indices and uses the projected index to derive Section 52 revaluations.

Example data

vdate == 31/10/2015
DOL   == 30/09/2006
DOR   == 29/06/2018 => 11 years statutory section 52 revaluation
NRD   == 29/06/2023 => 16 years total revaluations
CPI Assumption from basis == 1.47%
LRF   == 0.72
CPI Assumption specified with factors == 2.0%
Pension at DOL == £4346.82

Indices required for statutory Section 52

index end   == Sep 2017
index start == Sep 2006 (ie 11 years earlier)

Note that revaluation into years post 2009 use CPI not RPI. And that real indices are available only up to 3 months before vdate:

rpi start   == Sep 2006 (200.1)
rpi end     == Sep 2009 (215.3)
cpi start   == Sep 2009 (111.5)
cpi end     == Jul 2015 (128.0)
basis start == Jul 2015 (100.0)
basis end   == Sep 2017 (103.2) [ 100.0 x ( 1 + 1.47% ) ^ ( 2 + 2/12 ) ]

total indexation == 215.3 / 200.1 x 128.0 / 111.5 x 103.2 / 100.0
total indexation == 1.275

Revalue pension, apply admin assumption and cap

We need to apply the 2.0% pper annum admin assumption and only then should we apply the cap:

final inflation == 1.275 x ( 1 + 2.0% ) ^ 5
final inflation == 1.408

cap at 2.5% == 1.025 ^ 16 == 1.485 ( for Section 52 Lower )

final revaluation == 1.408

pension at DOR == 1.408 x 0.72 x 4346.82
pension at DOR == £4406.63