News
Public sector unions have lost their High Court battle over alterations to how pensions are calculat
Published on 7th December 2011 by Anthony Alexandrou
George Osborne announced in his emergency Budget in June 2010 that, with effect from April 2011, pensions would be uprated using the consumer prices index (CPI) instead of the retail prices index (RPI). Public sector unions challenged the decision, saying that it was unlawful.
However, a High Court judgment today stated: "The use of RPI has in the past been merely current practice. Looked at objectively it could not properly be asserted, therefore, that any promise of its continued use had to be assumed."
The Office for Budget Responsibility this week forecast that the future difference between RPI and CPI was likely to be between 1.3 and 1.5 percentage points, which has led unions to suggest that CPI-uprated pensions could be worth as much as 20% less over 18 years of retirement.
James Walsh, senior policy adviser at the National Association of Pension Funds, welcomed the news: "This ruling means that pension funds in the private sector are not left with further uncertainty around any move to CPI.
"Pension funds already face a complex task in deciding what the rules around switching from RPI to CPI mean for them, and this case could have added more uncertainty."
He added that one in four private sector final-salary pensions is able to move from RPI to CPI but that many schemes have RPI "hardwired" into their rules.