Pensions minister Steve Webb (pictured) said: "The government believes the CPI provides a more appropriate measure of pension recipients' inflation experiences and is also consistent with the measure of inflation used by the Bank of England.
"We believe, therefore, it is right to use the same index in determining increases for all occupational pensions and payments made by the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS)."
In order to implement the policy, Webb confirmed "small changes" to legislation would need to be brought before parliament "at the earliest opportunity".
The National Association of Pension Funds welcomed the move, claiming it would give trustees and fund managers greater flexibility. Chief executive Joanne Segars added: "This gives final salary pensions some breathing space, and it will make it a little easier for firms to keep schemes open."
However, TUC general secretary Brendan Barber branded the change a "stealth cut".
"The new Government undoubtedly deserves praise for their early commitment to linking the state retirement pension to the higher of earnings or prices but it now looks as if most other pensions will go up less than they used to in most years," Barber said.
"Over someone's whole retirement this will add up to a significant loss. This is a stealth cut on the pensions of middle income Britain."
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