On the go: The trustees of BT, Ford and Marks and Spencer pension schemes announced on Friday that they are seeking a judicial review of the decision to replace the retail price index with the consumer price index including housing costs from 2030.
The trustees of these defined benefit schemes, which represent nearly 450,000 members and £83bn of assets, believe the implications of the government’s decision has not been fully considered
In February, the schemes were granted an extension to the period in which they can consider filing for judicial review, after a request from the government to have more time to prepare its defence.
It is estimated that more than 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. Women will suffer the most from this change as they typically live longer, according to the schemes.
The reform will also significantly reduce the value of RPI-linked assets held to meet pension promises to members, weakening schemes’ funding positions and, in turn, adding pressure on sponsoring employers, the trustees added.
“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,” they stated.
As Pensions Expert previously reported, complaints were made when the reform was first announced in November about the lack of compensation for the holders of RPI-linked gilts and securities.
Index-aligning RPI with CPIH, which typically runs at 1 percentage point lower year on year, would negatively affect schemes with a large proportion of assets held in index-linked gilts.
Though the Ford and M&S schemes have not put the precise impact in the public domain, BT Pension Scheme has calculated that the reformed RPI will affect 82,000 of its 280,000 members, reduce the value of the scheme’s assets by £3.7bn, increase the scheme’s deficit by £1bn, and reduce the value of pensioners’ incomes by £2.8bn.
The schemes’ trustees consider that they have a fiduciary duty to their members to challenge the move, given the deleterious impact it is likely to have on the value of scheme assets, deficits and member pensions.
Following the filing of the claim with the High Court, the claim form and supporting material will be served on the UK Statistics Authority and chancellor of the exchequer Rishi Sunak, after which the parties have 21 days to acknowledge service of the claim and respond.
The court will then decide whether permission is given for the claim to proceed to a full hearing.
