The BT, Marks and Spencer and Ford UK pension schemes began their legal challenge yesterday to the government’s decision to replace the Retail Price Index (RPI) method of calculating inflation with the housing cost-based version of the Consumer Price Index known as (CPIH) from 2030. Members will recall that the Lloyds Trustee refused to join the legal action.
The significance of that shift is that historically RPI is higher than CPIH. The latest inflation figures for May 2022 show that CPIH was 7.9% but RPI was 11.1%.
It is estimated that 10 million pensioners will be poorer in retirement either from lower pension payments or lower transfer values because of the change in measuring inflation. The BT Pension Scheme has calculated that the reformed RPI will affect 82,000 of its 282,000 members, reduce the value of the scheme’s assets by £3.7bn, increase the scheme’s deficit by £1bn and reduce the value of pensioners’ incomes by £2.8bn. In its skeleton arguments to the High Court, the BT Trustee said that retired members of the scheme would on average be £34,000 worse off because of the change. Whilst the exact figures are going to be different, it’s clear that many Lloyds members, with final salary pensions, are going to be significantly worse off if the change is allowed to stand.
The case is expected to last for the next few days and the judgement is not expected before September 2022.
Members with any questions should contact the Union’s Advice Team on 01234 262868 (choose Option 1).