Increases to pensions in payment and the revaluation of deferred pensions are, broadly, calculated by reference to the relevant inflation index in use. Historically, the relevant index for these purposes was the Retail Prices Index (RPI) but in 2011 the Government began to use the Consumer Prices Index (CPI) to calculate social security and public sector pensions increases. As a result, a number of pension schemes have considered adopting the generally lower CPI, in order to reduce their liabilities.
However, there is no overriding or modifying statutory power allowing schemes to switch automatically to CPI-linked indexation or revaluation where RPI was “hard-wired” into the scheme rules. As a result, the ability of pension schemes to use CPI depends on the specific wording of each scheme’s rules. This pensions briefing will focus on the key case law governing this area, highlighting the situations where schemes can, and cannot, use CPI in place of RPI.
For further information please contact Leanne Johnson.