The Court of Appeal has upheld a decision made by the High Court that a pension scheme's deed does not afford trustees the ability to select the inflation measure by which increases are made.
As per the ruling on 2 November between Barnardo's and others versus Buckinghamshire and others, pension schemes have no power to switch from raising pensions in line with the retail price index to that of the consumer price index.
They may only move from the retail price index when that index is formally replaced.
However, according to Fuat Sami, partner at Sackers, this may not be the end of the story as an application for permission to appeal to the Supreme Court has been made.
Mr Sami added this continues to leave employers and trustees, who have been grappling with this issue, "in an unsatisfactory place".
He said: "Unless the government moves to consult more widely on amending primary legislation, to relax the existing section 67 requirements which govern members’ rights, the ability of schemes to switch from retail price index to consumer price index will continue to depend on how the scheme rules were originally drafted many years ago.
He added it was "essentially a lottery" as a result of this fact.
“Even for schemes which have clear in-built discretions to switch to another index, more uncertainty lies ahead for both employers and trustees as to whether this is permissible under the legislation, particularly given that this ruling is likely to be appealed and heard in front of the Supreme Court.”
ruth.gillbe@ft.com
