UK Pensions Speedbrief: more litigation on RPI/CPI

Just more than four years ago, the government announced that the Consumer Prices Index (CPI) would be used in place of the Retail Prices Index (RPI) as the standard index for determining pension increases in the public sector. This has fed through into the statutory requirements for revaluation of deferred pensions and increases in payment of pensions under private sector defined-benefit occupational schemes.

The results have, however, been haphazard, depending on the way individual scheme rules had interpreted the statutory provisions. Some schemes have found that their revaluation and/or increases have changed automatically to CPI; others have found that RPI had been (in some cases unwittingly) ‘hard-wired’; and others have been left uncertain as to the answer and as to whether there was any discretion to choose between the two.

We are aware of numerous cases where trustees or companies are referring the issues to the courts for guidance. The latest judgment is Arcadia Group Ltd v Arcadia Group Pension Trust Ltd and another. This confirms the earlier private sector case, Danks v QinetiQ Holdings (2012), and follows the trend of the public sector cases R (Staff Side of the Police Negotiating Board and others) v Secretary of State for Work and Pensions (2011) and R (FDA and others) v Secretary of State for Work and Pensions (2012) in suggesting that the judges, who have themselves had their pensions changed to CPI, are not inclined to interpret rules so as to put obstacles in the way of the move towards CPI in the public and private sectors, but rather to leave trustees and/or employers with considerable discretion. However, there has as yet been no judicial guidance as to how trustees who are left with a discretion as to which index to apply should go about exercising this…

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