The Barnardo's pension scheme has said it will take no further action in its fight to change the measure of inflation used for uprating its pension payments, which was lost in the Supreme Court this week.
On November 7 five judges decided unanimously that trustees of the Barnardo’s pension scheme would not be able to change the measure of inflation used for uprating from the Retail Price Index (RPI) to that of the Consumer Price Index (CPI).
Lord Hodge told the scheme it had to honour the existing rules of the scheme and could not replace RPI as long as it continued to be published.
CPI is generally lower than RPI and it is estimated the change could have reduced the scheme's funding shortfall by between £36m to £74m.
RPI has not been considered a "national statistic" by the Office for National Statistics since 2013 because the formula used to calculate it did not meet international standards but many pension schemes still refer to it in their deeds.
Elmer Doonan, a partner at Dentons, who represented Barnardo's in its fight, said giving trustees the power to switch from RPI to CPI would have helped cut funding costs.
He said: "The financial impact of a change to CPI for the members would be annual increases that are, on average, 1 per cent lower than under RPI and for the scheme the change to CPI would reduce its liabilities by more than £105m."
But a spokesman for the charity said: "We respect the findings of the court. It was extremely important for there to be clarity on the options available to both Barnardo’s and the trustees of the pension scheme on the inflation index (RPI) that could be used for future pension increases. The Supreme Court judgement handed down on November 7 delivers that certainty.
"We will not be taking any further legal action on this matter."
The Supreme Court is the final instance for appealing claims through the judicial system in the UK but as long as the UK is still part of the European Union, further appeals can be brought through the European Court of Justice.
But Mr Doonan said: "There is no European point of law in this case."
He said the judgement did not mean all pension funds in a similar situation would now be barred from appealing.
For instance BT is currently awaiting the outcome of its appeal of a similar High Court decision in January which had also found it could not change the index used for its scheme's pension increases.
Angela Dimsdale Gill, head of Hogan Lovells's pensions litigation practice, said: "The importance of the judgment is that it effectively enshrines a charter for the interpretation of pension scheme instruments.
"The insistence on strict textual analysis with an eye to the interests of the members, even at the expense of disregarding the circumstances in which the draftsman was operating at the time, may cause a few raised eyebrows in the industry."
