Court reserves judgment on CPI move

Court of Appeal expected to rule on unions’ CPI challenge by Easter

The Court of Appeal has reserved judgement in the case against the RPI-CPI pensions switch brought by Prospect and other unions this week.

The appeal against the High Court decision last year allowing the government to switch the uprating index for pensions and many social security benefits was heard over two days at the Royal Courts of Justice in London.

Four unions and a retired members' organisation, with a combined membership of 1.1 million, are appealing against the Chancellor's decision to use the Consumer Prices Index instead of the Retail Prices Index to uprate social security, state and public sector pension benefits.

The appellants are Prospect, the FDA, GMB, National Union of Teachers and the Civil Service Pensioners' Alliance. The case was conjoined with a similar appeal taken by seven other unions, including PCS, whose case was also lost at the High Court in December.

The court said it will reach a decision as soon as possible, likely to be before Easter.

Paul Noon, Prospect General Secretary, said: "This is just one of the pension injustices inflicted on public and private sector pensioners by this mean government. It will mean a permanent fall in standards of living for millions of people, breaking the promises made to them during the years they were saving for their pension.

“Not only will it drive many people into penury, by taking money out of people's pockets it will dampen the recovery from recession."

In December, the High Court rejected by a 2:1 majority the unions' argument that the switch to CPI put the government's desire to cut the deficit ahead of its duty to consider changes in the general level of prices, and was therefore unlawful.

The court also rejected the argument that CPI is not an appropriate indicator of inflation because instead of measuring increases in prices it assumes consumers will switch to purchasing cheaper goods. The unions are challenging both rulings.

The CPI switch was announced in the June 2010 Budget without consultation and took effect from April 2011. Prospect and others objected because over time CPI is 1.4% lower than RPI, according to the Office for Budget Responsibility.

Compounded over years of retirement, that will result in average losses of 15% to 25% in the value of members' pensions.

The government also gave private sector schemes the green light to make the same change except where the rules of a scheme specifically state a link to RPI. The Department for Work and Pensions last year calculated this will reduce the value of pensions accrued in the private sector by over £70bn.

The impact on state benefits and public service pensions will be even higher.