The Supreme Court considered the critical words ‘or any replacement adopted by the Trustees without prejudicing Approval.’
The central question was did that mean:
- the RPI or any index that replaces the RPI and is adopted by the trustees; or
- the RPI or any index that is adopted by the trustees as a replacement for the RPI?
The Court of Appeal had previously ruled that the official “replacement” of the RPI had to precede the adoption of that measure for indexation by the trustees. RPI can only be “re-based” by the authority responsible for publishing it and, without its official replacement, there was no other “replacement” the trustees could adopt instead.
The Supreme Court agreed unanimously for the following reasons:
- “replacement” does not naturally mean the selection of an alternative, although it depends on the context;
- the wording of the rule suggested a sequence of events rather than a single event of an index being adopted by the trustees. Their discretion and the requirement not to prejudice [Revenue] approval did not counter this view;
- the provision should be considered in the context of the whole document. Consistency with the with the Barnardo’s rules as a whole (noting the definition of “re-basing”) suggested that it was the official body and not the trustees who could replace the index;
- in the event of inconsistency between [Revenue] terms and scheme rules, the scheme rules must prevail;
- it was inappropriate to use hindsight to assess whether a provision made good commercial sense; and
- the scheme provisions had to be viewed without any preconceptions as to whether a certain construction would favour the employer or the members.
Having essentially agreed with the reasons given by the Court of Appeal, Barnardo’s appeal in the Supreme Court failed.
In relation to the questions arising under section 67 of the Pensions Act 1995, the Court of Appeal had approved the approach in the Qinetiq case. A switch from RPI to CPI was not viewed as a detrimental modification for section 67 purposes, as indexation gave rise to no accrued rights until the calculation had been done. As Barnardo’s appeal to switch indices had been dismissed, the cross-appeal on the subsisting rights provisions of section 67 was not addressed further by the Supreme Court.