The latest decision follows a challenge to an initial 2019 proposal by the UKSA and the Chancellor of the Exchequer to align the retail price index (RPI) with the CPIH. This has led administrators of all three schemes to take legal action over the legality of the changes, fearing they could affect pension system benefits and potentially leave millions of retirees in a worse situation. In September, administrators of three major UK pension schemes learned that the government had won a lawsuit they had brought before the Supreme Court, paving the way for the UK Statistics Authority (UKSA) to reformulate the retail price index measure. It will be replaced from 2030 by the CPIH, a version of the Consumer Price Index (CPI) that includes housing costs.1 A third challenge – the fact that the UKSA did not consult the public on its IPR decision and did not take into account their views when this proposal was in an “educational phase”2 , in particular with regard to compensation, was also rejected. In the most recent decision, the High Court dismissed the schemes` challenges on three counts – including concerns that the modification of the UKSA`s RPI was unlawful and that it had failed to take into account the impact of its RPI decision on holders of RPI-indexed gilts and bonds and those entitled to indexed pensions and the interests of “former users”. Various unions and public sector interest groups have challenged (through judicial review) the government`s decision to use the Consumer Price Index (CPI) instead of the Retail Price Index (RPI) as an index to determine public sector pension increases. The judgment delivered in the context of that judicial review was delivered on 2 December 2011. In summary, the court dismissed the unions` complaint and concluded that the government had not acted unlawfully in making this amendment. However, we expect the unions to appeal.
See below for details. The court dismissed the unions` complaint (unanimously for all but one reason) and found that the government had not acted unlawfully in switching from the RPI to the CPI. Reason 3 – Failure to properly consult: The pension trustees complain that the clerk did not properly consult the impact of the decision on the affected shareholders. They also identify gaps in the 2020 joint consultation, which focused on the technical implementation of the RPI amendment rather than the benefits or impact of the proposed change. This reason is defended by the limitation period – the consultation closed in August 2020 and any challenge must be filed immediately. The court`s decision will have a significant impact on indexed gilt investors and other traditional RPI users. It may also clarify the scope of the UKSA`s tasks in relation to other statistics within its competence, as well as more general principles for public decision-making affecting economic policy issues. However, the bar for a successful challenge is high and the Court will not consider the merits of the decision or issue it again. Below is a summary of the main grounds for the challenge and the outlook for the case. “It is not surprising that three UK defined benefit pension funds felt they had no choice but to challenge the government`s decision, which will result in a transfer of wealth of around £100 billion from holders of indexed gilts (mainly pension funds) to the government. This will reduce the value of pension transfers and lifetime income by 10% to 15% or more. Faced with rising inflation, many retirees are already struggling, and the IPR reform represents an additional and totally unnecessary blow.
The pension administrators put forward both grounds for a public law challenge and a contractual claim in relation to the decision: However, the court also stated that any of the three legal bases relied on by the claimants, namely that UKSA was legally obliged to consult on this matter, could in no way succeed. As part of the review, BT, Ford and M&S programme administrators challenged the decision to align the retail price index (RPI) with the housing cost-based version of the consumer price index from 2030 via the RPI in three key areas: The challenge raises delicate questions of legal interpretation that may have wider implications for how UKSA balances different competing interests. in other statistical decisions. debit. and perhaps for other public bodies that make decisions that require a balance between complex political and economic factors. Dear brother/sister You know that the FBU challenged the change imposed by the government in the way pensions are increased to account for inflation; from a practice that uses the retail price index (RPI) to a practice that uses the Consumer Price Index (CPI). The challenge was subject to judicial review and the hearing took place from 25 to 27 October in the High Court in London. There were two groups of claimants with different legal representation and different but complementary legal arguments. The FBU trial also involved five other unions; PCS, POA, NASUWT, Unite and Unison. The other lawsuit was filed by Police Bargaining Board staff, the Police Federation, the National Association of Retired Police Officers, the FDA, Prospect, the Civil Service Pensioners Alliance, GMB and some individual plaintiffs. The Minister for Labour and Pensions is required each year under social security legislation to examine the various social security benefits in order to determine whether they have kept pace with the general rate of price increases in the Member States. As he sees fit.
It must then increase these benefits by at least the same percentage as the general price increases. The relevant pension laws require the Ministry of Finance to increase public sector pensions by the same percentage as the annual increases in the benefits of the Secretary of State for Work and Pensions. In June 2010, the Chancellor announced in his budget report that the long-standing practice of measuring general price increases using the RPI would be changed and that the CPI would be used from April 2011. The reason for this change was that the CPI was a statistically more appropriate index that would also save money. The FBU said it was a deficit reduction measure. Savings for government and private sector employers The Chancellor estimated that savings from public sector pensions would amount to £6 billion during the legislature. The CPI is generally about 1.2% lower than the RPI per year. It is estimated that the loss for members of the utility system will be about 15% over time. Now that the transition to the CPI has also been applied to private sector pensions, the Department for Work and Pensions estimates that £73 billion has also been deducted from the value of private sector pensions, a significant windfall for their sponsoring employers and a corresponding loss for private sector workers.
The FBU claim covered four areas: This uncertainty may seem worrisome if you are a trader considering setting a new inflation swap now. However, current market prices show that traders do not expect the legal challenge to succeed. 1 PI UK government wins pension fund`s legal challenge to RPI change. 01 September 2022. (ii) the statements made to trade unions and their members did not constitute a legitimate legally binding expectation; The plaintiffs (which included the Police Federation of England and Wales, the Civil Service Pensioners Alliance, the National Union of Teachers and the Fire Brigades Union) challenged the legality of the transition from the IPR to the CPI on four grounds. The result The High Court`s judgment was delivered on 2 December 2011. The plaintiffs simply claimed that one of the four challenges had been successful in order to have the government`s action declared illegal. The court was divided on (i) challenging the “building argument,” with two judges ruling in favor of the government, and one finding that the decision was illegal and should be overturned. The courts ruled unanimously against both groups of plaintiffs on the remaining 3 points of contention.
The court`s reasoning for the decision was: This is exactly what happened in April. The trustees of the pension funds of Marks and Spencer, Ford and BT have filed a legal challenge to the UK`s proposed recalibration of the retail price index (RPI) to the Consumer Price Index, including owner-occupiers (CPIH). With regard to the applicants` second point – which the Registrar did not consult – the Court held that they could not provide any legal basis for their allegation that the Registrar was legally obliged to discuss whether compensation should be paid to former users. Toby Huth-Wallis, inflation trader at Nomura, says that if the transition were fully taken into account, the future difference between RPI and CPI – known as the wedge – would converge towards zero by 2030. The applicants argued that factors such as explanatory documentation, negotiations with unions, and past practices created a legitimate expectation that RPIs would continue to be used for future rating reviews, such that it would be unfair or abusive to have the authority to depart from this general understanding. The Court unanimously rejected this analysis. He acknowledged that the CPI takes into account to some extent the reaction of consumers to price increases, but stated that the CPI and RPI are measures that allow the Minister to detect the increase in the general price level “without undue difficulty.” .