NARPO: Government Challenged on Downgrading of Public Sector Pensions

A Judicial Review has been launched by a consortium of [five] separate bodies representing different categories of public sector workers, challenging a decision by the Secretary of State for Work & Pensions and the Treasury to change the way that public sector pensions are up-rated, in line with state benefits.

The purpose of the annual pensions up-rating is to make sure that pension pots do not lose by reference to increases in the general level of prices. Until now these up-ratings have been calculated according to the Retail Price Index (RPI) and the Government’s decision to switch to the Consumer Price Index (CPI), announced in the June 2010 Budget statement effectively down-rates public sector pensions. The difference is material: an up-rating of only 3.1% using the CPI, compared to a potential rise of 4.6% according to the RPI – and the CPI is predicted to lag some 0.8 – 1.5% behind the RPI for the next five years to 2016, having a cumulative downward impact on public sector pensions.

The challenge is that CPI incorporates consumer reaction to price rises (which will include substitution of cheaper goods for the more expensive) , whereas the statutory test is focussed on price rises themselves.

If successful, the claim will impact on all public sector workers and pensioners ( not only those from the civil service and police, but also the armed forces, the NHS and local government) , as well as a number of state benefits ( previously uplifted by RPI , and now CPI).

The Judicial Review is being brought by The Staff Side of the Police Negotiating Board, The National Association of Retired Police Officers, FDA, Prospect, The Civil Service Pensioners Alliance and the GMB.
The claimants are represented by Edward Cooper at Russell Jones & Walker, instructing Michael Beloff QC and Martin Westgate QC.
The application is first for permission for a Judicial review and, if expedition is granted, the hearing is expected in the next 3 months.

Clint Elliott, Chief Executive of the National Association of Retired Police Officers said:
“The Coalition Government decided to change to CPI indexation, despite clear assurances to public sector pensioners before the General Election and without seeking advice from the UK Statistic Authority. CPI does not properly reflect increases in prices and does not meet legal requirements.”