'Dissapointment' as High Court dismisses RPI/CPIH judicial review

The High Court has dismissed the judicial review of the decision by the UK Statistics Authority (UKSA) and Chancellor to align the Retail Prices Index (RPI) with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) from 2030.

The judgment also means that the Chancellor will not be required to pay compensation as a result of the indexation change.

The court case to decide whether the decision to change the way RPI is calculated began in June, after the trustees of the BT, Ford and Marks & Spencer (M&S) pension schemes were granted the judicial review at the end of 2021.

The review was based on three key arguments from the claimants, including concerns that the UKSA's RPI decision was "unlawful", and that UKSA failed to consider the impact of the decision on legacy users.

It also argued that UKSA failed to consult the public on the RPI decision while the proposal was still at a "formative stage", and that the Chancellor failed to consult with legacy users on the issue of compensation.

However, the court rejected all three of the grounds raised by the claimants.

In addition to this, the court explained why the RPI will not cease to be published when the RPI decision is implemented from 2030, confirming that a declaration will be made that that decision will not cause the cessation clause in index-linked gilts issued from 2005 to be triggered.

The pension schemes said that they were "dissapointed" by the judgement, confirming that they would be considering the judgement further, including whether to seek permission to appeal.

Responding to the judgment, a spokesperson for the schemes said: “We are disappointed that the UKSA has been allowed to align the RPI with CPIH from 2030 without proper consultation and consideration of the impact such a decision will have on schemes holding RPI index-linked bonds and the retirement incomes of their members.

“Many investors, including pension funds, bought index-linked gilts in good faith and now face losses of £90 to £100bn.

“This decision will leave millions of pensioners in defined benefit schemes with RPI linked benefits poorer through no fault of their own and facing substantial decreases in their year-on-year income. Women will be particularly impacted since they live longer and retire earlier.”

These concerns were echoed by Insight Investment head of solution design, Jos Vermeulen, who warned that the changes could present an "additional and entirely unnecessary blow" to pensioners already struggling amid rising inflation.

“We are disappointed that the government will be allowed to push ahead with their plans for RPI reform. Insight and a broad range of market participants highlighted significant concerns about the proposals during the government’s 2020 consultation," he added.

"It was of no surprise that three UK defined benefit pension funds felt they had no choice but to challenge the government’s decision, which will result in a transfer of wealth in the region of £100bn from index-linked gilt holders (largely pension funds) to the government.

"This will reduce pension transfer values and lifetime incomes by 10 per cent to 15 per cent or more."

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