On the go: The Supreme Court has denied BT the opportunity to appeal against the Court of Appeal’s ruling preventing the company from downgrading the inflation protection given to some of its defined benefit members.
The telecoms giant had wanted the right to change the indexation used for Section C of its DB BT Pension Scheme from the retail price index to the consumer price index, which is typically lower.
This marks the end of a protracted legal case, which trade union Prospect has described as a victory for more than 80,000 members of section C of the BTPS that would have stood to lose an estimated £24,000 each on average from the switch, according to Prospect's analysis.
RPI will continue to be used by the scheme to index members’ pensions.
The legal case was based on the wording of the rules of Section C of the BTPS – particularly the requirement for RPI to have “become inappropriate” for the purpose of increasing pensions before it can be changed for another index.
Prospect national secretary Noel McClean said: “We welcome this decision by the Supreme Court. Had BT succeeded it would have had the potential to cut the value of members' pensions in retirement by many thousands of pounds. This is a victory for members of Section C of the BT Pension Scheme that finally brings this matter to a close after a long and protracted legal battle”.
Commenting on the outcome of the case, Duncan Buchanan, partner at law firm Hogan Lovells said: “The legal position is now clear. Whether a scheme is able to switch increases to CPI from RPI depends on the precise wording of the rules. Whilst very little thought was given by those drafting the definition of "index" back in the 1980s and 1990s, with hindsight the ‘lottery’ of wording could impact pension schemes by tens or hundreds of millions of pounds.”
He added: “Even where the rules do allow for another index to be selected the decision to switch is not an easy one to make. Individual members' benefits will be impacted although it may be for the ‘greater good’ of the scheme in the long run.”
He forecasted that there might yet be some changes made to the "discredited" RPI by the Office for National Statistics.
Furthermore, CPIH – a new measure of the annual rate of UK consumer price inflation that includes owner occupiers' housing costs – could become the government's preferred index, Mr Buchanan notes. This would require yet more change.
