ADMINISTRATION


facilitate a mass transfer to the same basis. “What is needed is overriding legislation to allow companies to make this change. The only winners tend to be the specialist barristers and lawyers who make thousands of pounds in helping companies run these cases,” Ms Cogher says.


Fudging the RPI/CPI divide Those wishing for legislation overriding the lottery may yet have their wish. The chancellor recently announced plans to consult on whether to align the RPI with a version of the CPI between 2025 and 2030. This intention was revealed in a letter from


Sajid Javid to Sir David Norgrove, chair of the UK Statistics Authority. Sir David had recommended that the


publication of the RPI be stopped, and in the interim the shortcomings of the index should be addressed by adopting the methods of the CPIH, which includes a measure of housing costs in CPI. In a statement, Sir David said: “We have been


partner at Irwin Mitchell, says: “It is unusual for trustees to agree to adjust the payment of pension increases downwards before the main High Court hearing and judgment as this is when all the arguments are heard in detail in court. “Getting this downward adjustment agreed on an


rules and is a very arbitrary way to


take things forward


Deborah Cooper, Mercer


It is a lottery very much dependent on scheme


interim basis by a High Court Master does give comfort to the trustees. However, the fact they are prepared to go down this route, before the actual court hearing, leads me to suspect that Britvic has a very good case and that perhaps the current methodology used to determine the rate at which pension increases are being paid has been wrong in the past. We shall have to wait and see.” Ms Cogher continues: “It is not unusual for


employers and trustees to revisit earlier decisions on this made at a time when perhaps members were given the benefit of the doubt, due not to how the scheme rules were drafted but to what was said in accompanying member communications.” The RPI/CPI debate has been rumbling on ever


since 2010, when it was announced that increases to state pensions, public sector pensions and statutory increases for private sector pensions would, in future, be linked to CPI rather than RPI. Deborah Cooper, a partner at Mercer,


emphasises: “It is a lottery very much dependent on scheme rules and is a very arbitrary way to take things forward.” Given the enduring ‘lottery’ of scheme rules, some have called for government to step in and


clear that the RPI is not a good measure, at times significantly overestimating inflation and at other times underestimating it, and have consistently urged all – in government and the private sector – to stop using it. However, the RPI is unique as we need consent from the chancellor to make certain changes, such as the one we have proposed. “Although we regret that no change will occur


before 2025, we welcome the chancellor’s intention to consult on resolving current issues with the RPI.” Mr Scholefield adds: “The consultation about bringing RPI into line with CPIH would reduce the so-called lottery for pension schemes, as while RPI would continue to apply, it would be in its reformed state, which would be similar to the other widely used index, CPI. He continues: “Pensioners may not welcome


the change, but it is difficult to argue strongly in favour of a flawed calculation basis, especially if it flows though more widely in the economy at the same time.” In 2030 the requirement for the Statistical


Authority to consult the chancellor before making changes to the coverage or calculation of the RPI falls away. The Statistical Authority states: “While the


current authority board cannot commit its successors, the statistical weaknesses of the RPI make it unlikely that the authority would take a different view from our recommendations in 2030.”


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PHOTO: BLOOMBERG


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