In previous Newsletters we reported that tens of thousands of Lloyds staff would see their pension benefits reduce because of the changes to way pension increases would be calculated in future.
Trustees of the BT, Ford and Marks and Spencer pension schemes have a launched a judicial review of the Government’s decision to replace the retail price index (RPI) with the consumer price index including housing costs (CPIH). The argument is that the UK Statistical Authority didn’t have the authority to reformulate RPI and the Government failed to take account of the affect such a decision would have on legacy users of RPI.
Thousands of BTU members have written to their MPs, using a letter produced by the union, rejecting the Government’s decision. In that letter members say:
“This is an important issue which is going to affect many of your constituents who are members of defined benefit pension schemes. And I am asking you to either reject the advice of the UKSA and maintain RPI beyond 2030 or put in place mitigating measures to ensure that DB pension benefits are not reduced. To do nothing is simply unacceptable.”
Who Is Affected?
The RPI is the oldest measure of consumer prices in the UK and is widely used across the economy. For some Lloyds pension scheme members, pension payments are increased each year in line with the RPI. The Government is planning to do away with the RPI from February 2030. This new inflation measure results in a figure lower than RPI, often by as much as 1%. This so-called reform, if implemented, could result in 10 million retirees seeing significant cuts in their pensions. Women will suffer most from this change because typically they live longer.
So, what does the change actually mean? Barnett Waddingham, an actuarial consultancy, has calculated that someone currently aged 50, with an RPI-linked pension paying £10,000 annually from age 60, would have previously expected to receive £500,000 if they lived to the average age of 90. If the Government gets its way, that pension would be reduced to about £425,000.
The union is looking at the possibility of producing an ‘amicus curiae’ brief for the High Court proceedings. This is a document submitted to the Court by someone who is not party to the actual proceedings but is interested in the outcome – literally a friend of the Court. This brief would give us the opportunity to bring to the attention of the Court important issues and arguments that the other parties had not themselves raised.
We have also written to the Chairman of Lloyds Banking Group Pension Trustees Limited asking it to join the legal action on behalf of the tens of thousands of pension scheme members whose benefits are going to be reduced from 2030 onwards. The Trustee is under an obligation to protect the benefits of pension scheme members and we would expect it to join the action for that reason.
In the meantime, members with any questions should contact the Union’s Advice Team on 01234 262868 (choose Option 1).