New BTPS indexation battle looms as trustees challenge planned scrapping of RPI inflation measure

Telecoms & Financial Services, BT April 23 2021

Dave Jukes

The CWU has welcomed the decision of the BT Pension Scheme (BTPS) Trustees to mount a landmark legal challenge to Government’s plans to ditch the time-honoured Retail Price Index (RPI) inflation measure.

Amid concerns the Government’s decision last November to scrap time-honoured RPI calculations in 2030 – replacing it with the typically lower Consumer Prices Index (CPI) measure that includes housing (CPIH) – will significantly lower some indexation rates after that date, the BTPS has joined forces with the Ford and M&S pension schemes in seeking a Judicial Review of the decision.

Pensions experts predict that nationally over 10 million pensioners will be poorer in retirement as a result of the move, either because of lower pension payments or lower transfer values, with women suffering disproportionately from the change as they typically live longer than men.

BTPS trustees warn the reform will also significantly reduce the value of RPI-linked assets held to meet pension promises to members, weakening all pension schemes’ funding positions and, in turn, adding pressure on sponsoring employers.

A statement issued by the BTPS trustees explains: “The decision to pursue action has not been taken lightly, but the Schemes believe that a judicial review is necessary to protect scheme members and scheme assets from the detrimental effects of this decision.”

The CWU was one of many trade unions that came out strongly against the proposed replacement of the RPI inflation measure during a Government consultation last summer – but significantly the move has also been attacked by many groups representing private and corporate investors because of the negative effect on the indexation of assets, including Government bonds and gilts

Amongst the CWU members who stand to be most immediately impacted by the Government’s planned scrapping of RPI in 2030 are BTPS Section C members who only recently saw off earlier BT attempts to change their indexation arrangements from RPI to the typically lower CPI measure.

The company’s long-running but ultimately unsuccessful court battle to force that change – which would have reduced its pension liabilities about £2bn by way of lower future pension increases for around 80,000 Section C members – finally hit the buffers in July 2019 when BT was denied permission to escalate the case to the Supreme Court.

“Colleagues will remember that, in 2017, BT asked the High Court to change the indexing from RPI to CPI for BT Pension Scheme Section C members,” recalls CWU assistant secretary Dave Jukes. “That High Court case was not successful – and, subsequently, in January 2018 the High Court decision on the appeal also failed.

“It’s somewhat ironic that, after a series of utterly consistent court decisions blocking BT’s attempts to change pension indexation arrangements for Section C members, it is now a Government move that is threatening much the same – albeit delaying the detriment until 2030.

“Members in other sections of the BTPS are not directly affected, because their pensions are already uprated in line with the Consumer Prices Index (CPI) measure of inflation – and that will continue to be the case.

“In recent years, however, both the CPI and CPIH inflation measures of inflation have tended to stand at around 1% lower than the current RPI indexation enjoyed by BTPS Section C members – and, as such, we will be following the progress of the Judicial Review closely.”

Following filing of the claim for a Judicial Review on April 9, the Chancellor and UK Statistics Authority have until the end of the month to formally respond. The High Court will then decide whether permission is given for the claim to proceed. Members will be kept updated.