BT, Ford and M&S trustees to seek judicial review over RPI switch
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The trustees of the BT Pension Scheme, Ford Pension Schemes and Marks and Spencer Pension Scheme have said they will seek a judicial review of the decision to replace RPI with CPIH from 2030.
The trustees the three defined benefit schemes, representing about 450,000 members and £83bn of assets said they believe "the far-reaching implications of this decision have not been fully considered".
The trustees the three defined benefit schemes, representing about 450,000 members and £83bn of assets said they believe "the far-reaching implications of this decision have not been fully considered".
The schemes argue that about 10m pensioners will "be poorer in retirement either from lower payments or lower transfer values as a result of the effective replacement of RPI with CPIH", with women most affected because they tend to live longer.
The trustees of the three schemes said that "the decision to pursue action has not been taken lightly, but the Schemes believe that a judicial review is necessary to protect scheme members and scheme assets from the detrimental effects of this decision".
The trustees of the three schemes said that "the decision to pursue action has not been taken lightly, but the Schemes believe that a judicial review is necessary to protect scheme members and scheme assets from the detrimental effects of this decision".
The apparent concern about pensioners' increases mark a U-turn for at least one of the three schemes; the BT Pension Scheme only recently sought to reduce increases from RPI to the lower CPI for section C members in court, even appealing a decision, but did not succeed. Its section A and B members already receive increases in line with CPI, which is similar to CPIH.
The change to CPIH in 2030 will not reduce pension payments but likely lead to lower increases. The UK Statistics Authority argues that the generally lower CPIH is a more accurate measure of inflation than RPI, which it says is flawed in its methodology.
The key issue of the reform for many pension schemes is that it also significantly reduces the value of RPI-linked assets. This is "weakening schemes’ funding positions and, in turn, adding pressure on sponsoring employers" according to the trustees of the three schemes.
The Pensions Policy Institute has estimated that the switch will cost DB schemes about £60bn in total.
The reduction in assets and liabilities will not balance itself out for all schemes; some will see a negative effect on their assets, but the Treasury said last November that there will not be any compensation to schemes that hold index-linked bonds.
