The judicial review of the government’s decision began in June this year after it was launched by the administrators of the BT pension scheme, the Ford pension schemes and the Marks and Spencer pension scheme – pension funds which together represent 83 billion in assets and 438,763 members.
The High Court cleared the review last December after the government confirmed that the RPI would be overhauled in its comprehensive spending review in November 2020 – changing the long-standing method of calculating inflation to align with the CPIH inflation index from 2030.
The High Court ruled on three main challenges to the schemes – that the UKSA’s RPI was unlawful; that the UKSA failed to consider the impact of its RPI decision on holders of RPI-indexed gilts and bonds and those entitled to indexed pensions and failed to consider the interest “former users”; and that the UKSA failed to consult the public on its RPI decision and did not consider its views when that proposal was in a “formative stage”.
The schemes also claimed that the Chancellor failed to consult former users on the matter of compensation and failed to properly consider their representations in this area.
The court dismissed all of these challenges in a decision issued yesterday by Judge Holgate.
The schemes said they were ‘disappointed’ with yesterday’s decision – noting the ruling means investors who bought indexed gilts ‘in good faith’ could now face losses of up to £100billion sterling.
The plans said the judgment also means the government is not required to pay compensation as a result of the indexation change.
Responding to the judgment, a spokesperson for the schemes said: ‘We are disappointed that the UKSA has been allowed to align the RPI with the CPIH from 2030 without proper consultation and consideration of the impact that such a decision would have. will have on plans holding indexed RPI bonds and the retirement income of their members.
“Many investors, including pension funds, bought index-linked gilts in good faith and are now facing losses of £90-100 billion.”
The spokesperson added: “This decision will leave millions of pensioners in defined benefit schemes with poorer RPI-linked benefits through no fault of their own and facing substantial year-on-year declines in income. other. Women will be particularly affected as they live longer and retire earlier.”
The plans said they are now reviewing the judgment, including whether to seek leave to appeal the judgment.
The reform of the RPI, a “useless blow”
Insight Investment has long campaigned against RPI reform – a move it says was taken despite substantial concerns raised during the 2020 consultation, by a wide range of market participants.
Commenting on the High Court ruling, Jos Vermeulen, Head of Solutions Design at Insight Investment, said: “We are disappointed that the government is allowed to proceed with its RPI reform plans.
“Insight and a wide range of market participants highlighted significant concerns about the proposals during the government’s consultation in 2020. It is no surprise 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 in the order of £100 billion from index-linked gilt holders (mainly pension funds) to the government.”
Vermeulen added: “This will reduce pension transfer values and lifetime earnings by 10% to 15% or more. With inflation soaring, many pensioners are already struggling and the RPI reform is a blow. additional and totally unnecessary.”