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Public sector workers issue legal challenge over RPI-CPI switch

Six separate public sector organisations will today launch a judicial review challenging the Government’s decision to uprate future pension increases by the consumer prices index.

Legal advisers representing the Civil Service Pensioners’ Alliance, the Police Federation, the National Association of Retired Police Officers, the FDA, the GMB and Prospect have written to the Treasury and the DWP warning its decision to switch the measure used to calculate pension increases from the RPI to the CPI will be contested.

The public sector representatives argue that, in choosing the CPI, Secretary of State Iain Duncan Smith “has not acted within his legal authority nor strictly in accordance with relevant statute in adopting a measure of inflation that is, at least in part, directed towards changes in consumer behaviour rather than changes in prices”.

National Association of Retired Police Officers chief executive Clint Elliot says: “The coalition Government decided to change to CPI indexation despite clear assurance to public sector pensioners before the general election and without seeking advice from the UK Statistic Authority.

“CPI does not properly reflect increases in prices and does not meet legal requirements.”

Over the long-term CPI is expected to be lower than RPI. In March, the CPI was 4 per cent while the RPI was 5.3 per cent.

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There are 32 comments at the moment, we would love to hear your opinion too.

  1. A judicial review will make no difference. The cost of public sector pensions is not sustainable and it will have to be addressed one way or another

    Therefore, if a review orders that benefits cannot be decreased, then the members are simply going to have to pay the increased costs.

    I suspect that they are therefore probably shooting themselves in the foot.

  2. They really do not understand the problem do they?
    One day the public will wake up and realise that the private sector is massively subsidising the public sector, and there will be big trouble.
    Reform is necessary and the public sector needs to accept it, not try and use the courts in this way.

  3. pete wildebeast 18th April 2011 at 9:27 am

    Do they not understand what is going on here?

    Even if the judicial review is successful – where is the money going to come from – pushing us further to being like Greece!

    Would the Govt not just change the law and do it anyway?

  4. This will be an interesting case as:
    1) The rules for public sector schemes do not promise RPI increases. Instead they say increases are in line with the PI Act 1971. In turn this act says that the secretary of state decides what the increases in prices are. So no rule change has actually been made to the schemes.

    2) In previous Pensions Ombudsman cases he does not rule that statements contrary to the formal rules of the scheme will override the rules of the scheme. The rules always apply. This is because of a similar precedent set down by the High court. can the High court now go against previous rulings?
    i doubt the cahnge in a discretionary policy can be challenged. Just look at the Prudential staff case last week.

  5. If I understand it correctly, the difference between RPI & CPI is that housing costs are excluded from CPI.

    That being the case, once public sector workers have retired, they’ve paid off their mortgages, so why would they need the housing cost increases?

    However, I’ll grant that those living in rented accommodation may need this and that they are probably the less well paid and thus more vulnerable members. Having said that, they are probably also in receipt of some benefit if they are more vulnerable so, perhaps, that argument doesn’t apply.

  6. I am not entirely in agreement with the other comments here. It seems to me that a lot of public sector workers do a fine job and only get remunerated decently, of which their pension is a part. Surely new entrants should be offered a money purchase scheme and existing members should be allowed the pension they were told they would have.
    Anyway. If they take industrial action that will not be very comfortable will it? And they have every right to, I should think. Personally I believe this country is wasting billions in other areas that could be put to better use.

  7. How very convenient?
    For individuals to comment that public finances cannot afford to pay future pensions over the long term, when the current economic issue is a shorter term one. Commentators should not assume “that long term pension funding is unsustainable and that public pensions will have to be cut, or the contributors will have to pay more”.
    Give Local Government employees a choice. These are contracts of employment with legal foundations.
    If people think that “private” is always best, how come so many people are retiring later than forecast because their private pensions are so poor? Ironically from people who advise people to save for their retirement, but then don’t do so themselves.
    If I pay for a service or a benefit, i expect the contract to be fulfilled, not amended or reduced at some point in the future. Remember Robert Maxwell?

  8. It guess that most postings here have not taken their pension yet, and if it doesn’t affect you then the government are right (of course).

    I have taken my pension, AND it’s a Private Scheme but with the old government rules. I will suffer a 1.6% less increase this year (approximately £200 a year and every year hence) plus compounding the loss. The government will gain nothing from changes to my pension, only the company I worked for. Will that get the country back on its feet? NO.

    To add to the unfairness of it, other retired colleagues from the same company WILL still get RPI increases, as their scheme states RPI.

    As a retiree I have no means to increase my pension, and have to accept the reductions. If I was still in employment I could make some adjustments.

    Don’t forget it’s not just about “housing costs”, Council Tax, TV licence, VAT and petrol prices are also excluded from CPI – I still have to pay for these!
    Maybe others would think differently if they were in my position.

    The whole government decision is completely unfair – akin to Gordon Brown’s 10p tax change.

    I say to the government, reverse the decision or put ALL pensions on CPI, then at least there is some fairness to the farce.

  9. For 38 years public servants have been told that their pensions would be index linked to the RPI. The coalition keeps saying that they will honour accrued rights. Also all three major parties spokesmen stated in public that they would not change the index linking of public service pensions. The mistake is that government never had a fund for these pensions and treated employees’ and employers’ contributions as a way of retrieving tax over the years. There is much injustice here and just because there has been a model of injustice in the private sector does not mean that we all have to join the race for the bottom.

  10. kevin Archer | 18 Apr 2011 2:29 pm

    These are contracts of employment with legal foundations…..

    If I pay for a service or a benefit, i expect the contract to be fulfilled, not amended or reduced at some point in the future……

    ———

    Kevin

    The key point is that there is NOT an RPI promise in the rules of these pension schemes. That is why the indexatoin has changed without a corresponding change to the rules of the public sector pension schemes in question. No rule change is needed as no promise was made to start with.

    That is why the goverment is confident of its changes to the indexation basis and that is why the case is likely to fail.

    If you can find one rule from any of these schemes guaranteeing RPI then please point it out to all of us.

  11. GlenKel | 18 Apr 2011 3:24 pm

    For 38 years public servants have been told that their pensions would be index linked to the RPI. The coalition keeps saying that they will honour accrued rights. Also all three major parties spokesmen stated in public that they would not change the index linking of public service pensions. The mistake is that government never had a fund for these pensions and treated employees’ and employers’ contributions as a way of retrieving tax over the years. There is much injustice here and just because there has been a model of injustice in the private sector does not mean that we all have to join the race for the bottom.

    —–

    Disagree that it is a change to accured rights but in any event that is one for the High Court to answer.

    Agreed that there should not be a race to the bottom but this leaves the question of who is going to pay for the (estimated) £1+ trillion of liabilities? That’s a big unanswewred questoin even if we say that liabilities would be spread over the years as the liabliity is still increasing (or it was until the CPI matter came along).

    And if this is to be the private sector/ individuals then this will leave us with a two tier pension system. How can this be fair? The unions do not seem to care about equality for all – they only want to look after their own. Until the real question of who should pay for retirement can be answered we will continue to have serious problems.

  12. Trade Union only survive in any strenght via the public sector because the public sector is funded out of taxation. It time the public sector feell into line with reality. Why must I pay two pensions?

    The Pensions Secretary, says that to resolve the pensions crisis we need people “to take responsibility for themselves” Those of us in the private sector need to ask ourselves: Why should we save for two pensions, our own and his, when he is perfectly capable of taking ownership and personal responsibility for his own pension?

    Actuaries Hymans Robertson, calculate some 26 per cent of council tax receipts now goes towards public sector pensions, and there’s every possibility this figure will rise over the next five years, as age-related costs continue to feed in.

    I object to the Government acknowledging the demise of the Defined Benefit Pension Scheme in the private sector, then telling those workers we all need to save more and not to expect to retire before the age of 70, while at the same time the Government and public sector unions expect private sector workers to pay taxes to fund public sector pensions so that they can retire well before 70 on a guaranteed index linked scheme for life. How fair is that?

  13. For 30+ years my public sector scheme rules have said “indexation will be via RPI inflation” so in my book this makes a commitment that cannot be broken without consultation, negotiation and agreement and then it should only be changed for future service because I have accumulated accrued rights. It is probably right that there have to be changes affecting future service. The scheme administrators have written to everyone saying CPI is coming in but have so far not responded to letters challenging this.

  14. This of course applies not just to public sector pensions but to those of the privatised utilities, whose longer standing schemes were based on the same principles. What some commentators have overlooked is that when these schemes were set up, CPI did not exist as a pensions index. Irrespective of the fact that they are subject to the provisions of the 1971 Pensions Act Review Orders, the rules of some schemes specifically stated that they would be linked to RPI, at that was the only appropriate index of inflation at that time. Since then, employees have kept their part of the bargain by paying into their pension funds throughout their working lives, only to be betrayed as they near retirement by this government’s shameful actions.
    As to who should make up the pension deficits, surely that’s down to the employers who chose to take long pension holidays whilst the funds were in surplus, happily awarding huge bonuses to their executives whilst turning a blind eye to their rapidly diminishing pension reserves. A situation not improved by recent legislation, either from this government or it’s incompetent predecessor.
    If the present government wishes to encourage folk to invest for their retirement, then pillaging the life savings of those who’ve done just that is hardly going to act as an incentive.

  15. Don’t know if anyone will read this, as we are in to Tuesday, but very glad to see a more comments in favour of the public sector workers not being stitched up.
    The reason the rest of us are paying for their pensions, as well as our own, is because this is supposed to be a democracy and that is how previous governments, which we voted in, decided to remunerate the public sector, many of whom got crap salaries (and many still do).
    We all have to accept some short term pain for the mess the bankers etc. have made but the old public sector worker will be paying for the rest of their lives remember. Other solutions have to be found.

  16. This change actually affects private sector pensions where the scheme Rules don’t specify increases in line with RPI and are the statutory minimum. It also applies to deferred pensions increased by the statutory minimum. So some of the people on here shouldn’t perhaps be so smug.

  17. Perhasp the Government believes that integrity and morlaity are changeable as well. When someone states what they will not do repeatedly to get elected and then do the exact opposite when in power is it any wonder that trust is eroded. It works the other way round as well – there was clear statements to take the bankers to task and reduce the deficit by that means as they caused most of it in the first place and virtually nothing is being done. It makes one sceptical that those in government positions are keeping the door open to lucrative roles in the future. Come on lets have British honesty as it once was and your word being your bond.

  18. So let’s all of us who’ve had the earnings related tier of our State Pensions whittled and chiselled away over the years mount a JR on the grounds of breach of government promise. And, if we win, everyone else can pay. Never mind the state of the nation’s finances. We’ve got our rights.

  19. To those people who say that there is no rule regarding RPI I would only point out that in the literature produced by the Dept of Education for the Teachers Pension Scheme it specifically states that the measure used for uprating will be RPI. at te very least this would be pension mis-selling and could give rise to a claim.

  20. I work on the JET nuclear fusion experiment near Abingdon Oxford.

    We are one of the Government quango’s with a gold plated public sector pensions. Our pension scheme is the UKAEA Combined pension scheme. We used to pay 7.5% of our wages into the scheme back in 1990, but the company reduced our contributions to 5% because that was the new calculated amount that was required to make the scheme self funding. The pension up to now has always increased by the RPI. We were informed in the pension handbook that our pension would be linked to the RPI and that accepting the rules of the pension scheme was a terms and conditions of employment. A forced change to a CPI link would surely mean that we were all mis-sold our pensions.

    Many of the scientists and support staff have retired from the project, some have passed away leaving their widows receiving some of their pensions.

    The change of index linking from RPI to CPI will not only affect us that are still in work but also these retirees and widows.

    Many of the British scientists, besides being paid less than 50% of their European partners working on the same team, before year 2000, were working up to 16 hours a day, 5 days a week. Most did not claim overtime, Just claiming 8 hours a day. Why do the private sector workers believe that it is fair that we should have our pensions robbed just because they have in many cases had theirs robbed. It is amazing how many capitalists turn socialist when it suits them !!

  21. I wish people would avail themselves of the FACTS before they try and impass their ill-informed opinions on the wider public……..this applys to all of those who find the public sector an easy target…..just as the current government do!

  22. I was employed as a civil servant for 37 years never highly paid but regarded the pension provision as part of my remuneration and contract of service. All the literature i have ever seen regarding pensions clearly stated that the pension would be increased annually by the RPI and i never doubted that this would always be a part of my pension provision.Whatever you may think about public service pensions it can never be right to move the goalpost after the ball has been kicked and to tell people after possibly 40 years service that although they were promised increases in line with the rpi it can no longer be afforded and so you cant have it!…If I tell my council that i can only afford part of my council tax because i have not received my full pension increase i dont think that they would be very sympathetic! What the government has done {after promising before the election that they would not make this change} is morally wrong and totally unacceptable. I just hope that the court will give us all justice and show the government that they cant just do whatever they please and blame the deficit for it. I am still waiting for them to take some worthwhile action against the bankers who are all still receiving their millions in bonuses. It really is hard to believe that “we are all in this together” I think that the old saying is very true “all men are born equal but some are more equal than others”

  23. Anonymous | 22 Apr 2011 9:29 am

    To those people who say that there is no rule regarding RPI I would only point out that in the literature produced by the Dept of Education for the Teachers Pension Scheme it specifically states that the measure used for uprating will be RPI. at te very least this would be pension mis-selling and could give rise to a claim.

    ———

    This is the point made by Lesley N earlier on. In previous cases the High Court has said that scheme booklets do not override the formal rules of the scheme. An individual would have to prove that they relied on the information to their detriment.

    What other option was there? Not joining the scheme is the only one that comes to mind

  24. My Pensions Handbook states an increase in line with RPI, the Pensioners Handbook states an increase in line with the RPI. My annual pension statement has always stated the link to the RPI.
    The pension has always up to now paid pension increases of RPI. The Rules apparently are not clear and so the government choose to rob us.
    I have been mis-sold my pension and when they are finally defeated over this, maybe in years to come, I want the difference plus interest repaid in full, backdated to April 2011. You would possibly expect to be robbed by some confidence trickster, but being robbed by the government is 100 times more unacceptable, discusting !!!!

  25. Colin Jackson 1st May 2011 at 1:22 am

    Prior to taking early retirement in 1996, I looked very carefully into what my pension entitlement would be. My then employer, Nottinghamshire County Council, who offered some enhancement of my service as part of a voluntary redundancy package, laid on a pre-retirement course which I attended. During this course it was clearly explained that my annual pension would be linked to the Retail Price Index but not until I reached the age of fifty-five years at which point in time my pension would be increased in line with RPI changes in the interim period and annually thereafter. I consulted my Trade Union (NAS/UWT) at the time and it confirmed the basis of the indexation of teachers’ pensions. I obtained from the Teachers’ Pensions Agency their Guide to Teachers’ Superannuation (England & Wales) which states in black and white on Page 23 of the booklet, “Your pension will be increased to take account of increases in the cost of living. This is often referred to as ‘index-linking’ because the increases are related to rises in the Retail Price Index. In the case of premature retirement no increases can normally be paid until the pensioner reaches the age of 55 years.”

    Last year, in April 2010, there was no increase in my pension as the RPI for the year ending September 2009 had not risen. This year, however, I was anticipating a rise of 4.6% in my pension to reflect the increase in RPI for the year ending September 2010. Notwithstanding, the TPA has advised that the increase in teachers’ pensions this year will be just 3.1% because HM Treasury’s policy is to base indexation from this April on the Consumer Price Index. This unilateral decision to change the basis of indexation of public sector pensions has seemingly been introduced without any consultation and just imposed on existing pensioners like me. I consider moving the goalposts in this way to be completely unfair and not to be in line with natural justice.

    I have looked at the history of these indices and it would appear that CPI was first devised circa 1987/88 but nobody back in 1996 when I retired from full-time work mentioned, even remotely, the possibility of using this index as the basis of indexation of teachers’ pensions. Indeed, I repeat, it was categorically stated that the indexing of teachers’ pensions would be based on RPI. For the past twenty odd years, RPI has seldom been less than CPI and usually it has been significantly more. This year, as a result of the change to CPI, my pension is more than £200 less than it would have been had the increase been based on RPI. If these indices perform in the future in the way that they have in the past, I shall be robbed of increasingly significant sums, year on year, for the rest of my life, as will my wife, should she survive me, for the rest of her life! This is patently unacceptable and is frankly tantamount to a breach of contract. I took every reasonable step to ensure I knew precisely what my pension entitlement was when I gave up my full-time teaching post and accepted the early retirement and voluntary redundancy deal. Now, it seems that the Government are causing the TPA to renege on a significant aspect of that deal by introducing a change to the basis of pension indexation. I do not understand how they can do this legally and morally and I really do feel that somehow or other I should be able to obtain redress.

  26. Has anybody more information on when this said challenge to the change in indexing is going to take place. I would like to monitor the events and hopefully have the chance to voice my opinion. I feel that I have been tricked out of my promised pension increases of which apparently is quite legal. I only want what I am entitled to, unlike some individuals that I don’t need to mention

  27. Colin Jackson | 1 May 2011 1:22 am

    This is patently unacceptable and is frankly tantamount to a breach of contract.
    ——-

    You could have saved yourself typing all the text – and the current legal action – by simply showing a copy of the contract.

    Unfortunately i suspect that you, and all the other complainants, have no such contract. To date i ahve not seen one complainant produce anything resembling a contract when challenged.

    The rules of the pension scheme state that increases are paid in line with the Pensions Increases Act 1971. If anything is your contrct then it is the formal rules of the scheme. These state that the secretary of state decides what he beleives is the increases in prices. So there has never been an RPI statement in the rules of the scheme.

    The sooner this review happens the better.

  28. Note also that the unions have not actually even tried to argue a change of “contract” for they surely know that such a complaint is doomed.

    Instead they have tried to challenge the secretary of state on his “discretion” to decide the increase in prices which is very difficult to do. Hymans Robertson have pubished a good piece on this.

  29. Christopher Burke 30th June 2011 at 5:23 pm

    Readers might be interested to know that, according to Mr Ben Norman, Deputy Secretary to the Bank of England, RPI is to be used in 2011 for calculating increase in The Bank of England and Court Pensions.

  30. Those saying ‘so what’ here really don’t understand the situation. I have been retired for eight years and made all my plans on the understanding that my pension would be index linked to RPI, the promise made to me for 35 years in teaching. It is also what has happened for the past 20 odd years or more.
    For the government to unilaterally, retrospectively and retroactively tear up that agreement when it is far too late for me or any other pensioner to do anything about it is contrary to natural justice. A private provider would be successfully sued, which is why the government backed away from requiring the same in the private sector, their original intention.
    All of my retirement plans were based on the PROMISE made to me in all my years of work, when I accepted generally low pay because at least the pension would be some recompense.
    I hope the legal challenge will go all the way to the European courts as this is one of the most breathtakingly dishonest decisions taken by government for many years.

  31. NASUWT are striking because the government have point blank refused to show teachers the current valuation of their pensions. This is because they know damn well that they are affordable and sustainable. How do we know? Because teachers were told this in 2005!! Vote for the Robin Hood tax, that is the way forward. A tax of 0.05 on large bank transactions which would raise £80 billion pounds for the uk in 2 years. Apparently 20 eu countries have already signed up to it. NASUWT also standing up for standards. have you seen what the government is doing to education. You dont have to be a qualified teacher to teach in an academy or free school. The director of EACT that sponsors academies is on £250k per year despite teachers being made redundant in academies!! How can the Govt justify that? I know, its called privatisation.

  32. Well the conservatives dragging the liberal democrats by their hair behind them have won the legal battle to rob us of our rpi pension increase.Legally only as it is morally indefensible to do what they have done. The conservatives have always been and always will be on the side of the rich and totally out of touch with ordinary people. They have blatantly refuse to punish the bankers have failed to increase the pensioners tax allowance taken tax credits from families but given a reduction in income tax to the most wealthy in the country including themselves!! They then appear mystified as to why we dont believe that we are all in this together! I think that they genuinely believe that we are all so stupid that we dont realise what they are doing! most of us have not been to eton but we are not that daft! The next general election cant come too soon!!!!!!!!!!!

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