Unions launch legal challenge to CPI switch

Unions launch legal challenge to CPI switch

Six trade unions and pensioner organisations are to launch a legal challenge to the government’s decision to link increases in pension benefits to the Consumer Prices Index.

On behalf of more than 800,000 current members and pensioners, they will lodge an application for judicial review at the High Court on Monday 18 April.

The six claimants are Prospect, the FDA, GMB, the Police Federation, the National Association of Retired Police Officers and the Civil Service Pensioners’ Alliance.

They are all seeking to block the switch from the Retail Prices Index to CPI imposed by order in Parliament which took effect this month.

The effect of the switch is to lower the increase to public service pensions that would have taken place this month from 4.6% under RPI to 3.1% under CPI.

Because CPI is on average 0.8-1.5% lower than RPI, over time the switch will save the Treasury £6 billion a year in uprating costs by 2014-15.

Projections by the Independent Public Service Pensions Commission are that the CPI switch will cut the value of pension entitlement for existing pensioners by around 15%, and by even greater amounts for staff who are still in employment or who have a deferred pension.

The application makes the case that CPI is not a fair indicator of inflation for pensions uprating since it excludes housing costs and uses a different formula to aggregate price increases to RPI.

The Office for National Statistics is already reviewing CPI to establish whether it should be revised to include housing costs.

And the Royal Statistical Society has risen to the Treasury indicating that: “We do not feel that it currently serves the purpose of being a sufficiently good measure of inflation as experienced by households to be used in uprating pensions and benefits or for use in wage negotiations.”

“This is not just a public sector issue,” said Dai Hudd, Prospect Deputy General Secretary. “The Department for Work and Pensions estimates that the switch to CPI will affect 80% of defined benefit schemes in the private sector.

“We believe we must hold ministers to the commitments they gave on pension indexation before the last election. Otherwise, the government’s mean trick will force hard-up pensioners to pay an unfair share of the cost of reducing the fiscal deficit.”