View the article online at http://citywire.co.uk/money/article/a576230
Unions lose appeal over public sector pension changes
Trade unions have lost an appeal to overturn the government’s move to increase public sector pensions in line with the consumer price index (CPI) instead of the retail price index (RPI).
Trade unions have lost an appeal to overturn the government’s move to increase public sector pension in line with the consumer price index (CPI) instead of the retail price index (RPI).
The move to CPI from RPI has been a battleground for the unions, which argue that public sector workers will be put at a huge disadvantage because their pensions will grow at a slower rate of inflation. CPI generally increases at a slower rate than RPI as the latter includes mortgage interest payments.
Last year, when the CPI inflation measure was used to calculate pension increases for civil servants, teachers and the NHS, they received a 3.1% rise instead of the 4.6% they would have enjoyed if RPI was used.
In December the unions lost a High Court challenge in which they argued the government was acting beyond its powers and the CPI switch was motivated by the savings the government would make.
The Court of Appeal has upheld that decision unanimously. The judges also refused the unions permission to appeal to the Supreme Court.
Malcolm McLean, consultant at actuaries Barnett Waddingham, said: ‘The government will have breathed a deep sigh of relief that the unions have lost their appeal against the judicial review that backed the original decision to use the CPI for up rating public sector pensions.
‘For they know, as do the unions, that using CPI instead of RPI is likely to produce billions of pounds of cost savings over time and that will in turn have a detrimental effect on the value and purchasing power of members’ pensions for the future.’
McLean said the CPI-RPI switch was a ‘more significant change’ than any of those proposed by the Hutton report into public sector pension reform and warned it would lead to more resentment against future reforms.
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by Daniel Grote on Apr 23, 2014 at 14:30