On the go: The High Court ruled against an attempt by a UK defence company to change the way it calculates final salary pension increases last week, the latest decision in a string of debates that have put millions of pounds in payments to retirees at stake.
Thales UK, a division of the French multinational, was appealing against a decision by the Pensions Ombudsman in December that it must continue to measure increases to pension payments in line with the retail price index, a ruling the judge acknowledged prevented the scheme from saving about £20m in liabilities.
The case had originally been brought to the ombudsman by pension member Robert Carr, after Thales sought to adjust the way it calculated inflation in line with the consumer price index, which runs about one percentage point lower than RPI.
While differences between CPI and RPI are technical and seemingly slight, the stakes are high for pensioners across the country. CPI is generally considered to be the more accurate reflection of real inflation, but compounded over the years this less-generous index could result in retirees each losing thousands of pounds in payments.
David Everett, a partner at LCP, said this was “another case that illustrates the difficulties to be had in persuading the courts to approve a move from RPI to CPI where the rule is remotely ambiguous”.
He added: “What is notable about this case is the ombudsman’s role. A complaint to the ombudsman may now be a cheap and easy way for members to challenge RPI to CPI switches.”
Anthony Arter, the Pensions Ombudsman, said he was “delighted that the High Court has concurred with my decision and found in Mr Carr’s favour”.
Thales was approached but did not respond to a request for comment.
Earlier this year the UK Statistics Authority proposed aligning RPI, which is used by the Treasury but consistently overstates inflation, with CPI, including housing costs. However, chancellor Rishi Sunak extended a consultation on the reform this month amid the coronavirus pandemic.
The Thales case comes on the back of a decision by the High Court in January that IT company Atos should continue to use RPI for calculating pension payments, when the company’s lawyers argued that changes in the index had been “so profound and extraordinary, and so unthinkable and unforeseeable” that it was no longer an accurate measure of price inflation.
