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Pension schemes press ahead with legal action on RPI changes

Pension schemes press ahead with legal action on RPI changes

The trustees of the BT, Ford and M&S pension schemes have pressed ahead with their call for a judicial review of the government’s decision to align RPI with the consumer price index with housing costs by 2030.

Trustees of these defined benefit schemes, which represent nearly 450,000 members and £83bn of assets, believe the implications of this decision have not been fully considered by the government.

It is estimated that more than 10m pensioners will be worse off in retirement either from lower payments or lower transfer values as a result of the effective replacement of RPI with CPIH. 

The schemes also said the reform significantly reduces 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 schemes deem it necessary to launch a judicial review in order to “protect scheme members and scheme assets from the detrimental effects of this decision”.

They will now file their claim with the court before notifying the UK Statistics Authority and the chancellor, which then 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, in whole or part.

After a government consultation it was decided that from 2030, RPI will be aligned with CPI including housing costs.

But as CPI runs at a lower rate than RPI, typically by around 1 percentage point a year, many in the industry have warned the move would negatively affect millions of people.

Those hit hardest would be savers who receive an inflation protected pension from a defined benefit scheme or annuity as it could see them left with a lower value retirement income in the future.

The ABI previously estimated that implementing the changes by 2025 could leave those affected £122bn worse off and pushing it back to 2030 would reduce the cost to £96bn.

RPI reform has previously been the subject of several court cases, such as BT's or Barnardo’s, in which trustees and employers sought approval to change their inflation indexation to reduce benefit payments to members.

Treasury has been approached for comment.

amy.austin@ft.com

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