UK - Numerous pension funds are estimating the variance between the retail price index (RPI) and the consumer price index (CPI) to be over 0.7%, according to a new report by KPMG.

The KPMG's Pensions Accounting Survey 2011 says that 50% of the companies surveyed have used an average deduction of 0.6% to RPI inflation when setting the CPI inflation assumption.

However, the survey points out that the 0.6% figure hides the fact that 74% of these companies have used either a 0.5% or a 0.7% adjustment.

In February this year, the Bank of England said in its inflation report that the difference in how the two indices are constructed will lead to a change of 0.3% to CPI inflation and 0.6% to RPI inflation. As a result, the CPI/RPI gap will be increased by a further 0.3%.

Therefore, the KPMG pensions team expects the average deduction to increase in the future, which will have an impact on investors' liabilities.

Narayan Peralta from KPMG's pension practice said: "CPI obligations for pension schemes raise questions around whether they can buy CPI-linked bonds or not.

"Historically, the UK government has always issued RPI-linked bonds. In the future, investors will probably demand more CPI-linked instruments, which creates a new market opportunity. However, it is not clear that the government will agree to step in to satisfy demand."

The CPI index was introduced by the government in July last year in order to regulate pension schemes.

From April, public sector pensions - and private sector pensions where scheme rules permit - had to increase pension payments in line with CPI.

The survey also shows that companies are continuing to make changes to defined benefit provision or implement liability management measures as they are looking to reduce the rising costs and risks that their schemes poses to the business.

Peralta explained: "We are also seeing a big trend in companies wishing to manage the level of risk in their pension schemes.

"Enhanced transfer values and swapping out non-statutory pension increases are proving to be popular ways to achieve this, along with the more traditional route of insurance protection given favourable pricing", he added.

Meanwhile, the UK's Sustainable Investment and Finance Association UKSIF has called for the proposed Green Investment Bank to be set up by legislation so that it can demonstrate credible governance and sufficient political independence.

In a letter to the Prime Minister David Cameron his deputy Nick Clegg, the association said the Green Investment Bank (GIB) needed to meet three key tests: a strong and trustworthy governance framework, the transparency needed to allow investors to assess risk and a robust approach to managing political risk.

UKSIF called for legislation to lay down the governance, purpose and independent borrowing powers of the bank. The letter also called for appointments to the shadow board that will run the bank initially to demonstrate clearly the government's commitment to private sector governance expertise and visible political independence.

The letter was sent ahead of expected further announcements by the government about the Green Investment Bank next week.

Penny Shepherd, the organization's chief executive said: "Following the financial crisis, Sir David Walker recommended stronger and more effective governance of banks and other major financial institutions to protect the public interest."

She added that good governance and transparency were "essential" to the success of the bank.

Shepherd had previously criticized the government when it announced that the GIB's ability to issue bonds would be linked to the

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