UK roundup: CPI v RPI, Unison, Unite, Sackers, USS, SEC
UK - The UK's coalition government has been attacked over "broken promises" to pensioners, as the Court of Appeal was set to hear a case on the legality of its switch in indexation from the retail prices index (RPI) to the consumer prices index (CPI).
The hearing, scheduled to run today and tomorrow, follows a High Court judgement from the end of last year, dismissing an application for judicial review of the government's decision to change the level of indexation for pension schemes.
The new measure of CPI is traditionally lower than the previous RPI measure.
Pension lawyers have already said chancellor George Osborne would watch the "latest skirmish" closely.
Mike Duggan, general secretary of the Civil Service Pensioners' Alliance, warned that the switch would have a "devastating effect" on retirement incomes.
"Our legal challenge is the direct consequence of the coalition's broken promises," he said.
"Before the last election, both the Conservatives and Liberal Democrats promised pensioners that their accrued rights to increases to their pensions would be secure. They have both reneged on that promise."
He said it was "clear" the switch to CPI was made in an effort to reduce costs for the Treasury across public sector schemes, rather than accurately reflect the levels of inflation faced by pensioners.
"Reducing the value of pensions just to save money is not allowed under the law governing how pensions are increased," he added.
Duggan received support from union Unison, with general secretary Dave Prentis saying that pensioners were being "unfairly targeted" to reduce a deficit they did not cause.
"Meanwhile, it's still bonuses for the bankers," he said. "This government may try to claim that we are all in this together - but pensioners will not be fooled."
However, referencing last year's Independent Public Service Pension Commission, chaired by Lord Hutton, Zoe Lynch, partner at law firm Sackers, said the changed indexation measure could save the Treasury as much as 15%.
"The impact this ruling will have on public finances makes it very unlikely that the unions will win on appeal - there is simply too much at stake," she predicted.
"One thing is certain - George Osborne, who is busy trying to balance the books for the forthcoming Budget in a month's time, will be watching this case with some anxiety."
She predicted that, given its importance for public finances, it was "doubtful" a ruling would take long.
Meanwhile, a letter co-signed by one of the UK's largest schemes, the £32.8bn (€39.2bn) Universities Superannuation Fund, has warned the US Securities and Exchange Commission (SEC) of a "growing movement" to undercut market reform.
The letter, sent last week by the $234bn ($178bn) California Public Employees' Retirement System's chief executive Anne Stausboll on behalf of more than a dozen pension funds and asset managers, predicted that movement against the recently enacted Dodd-Frank Act would risk undermining investor confidence.
"If this movement is successful, there is a very real risk that investor confidence will erode," the letter to SEC chairman Mary Shapiro said.
"The Commission plays a vital role in bolstering investment confidence in the public markets by adding transparency for investors, enforcing director independence and enhancing governance."
Signed by institutional investors representing more than $1.6trn, including APG, manager for the Netherlands' largest pension fund ABP, as well as BT Pension Scheme Management and the AUD43bn (€33bn) Australian Super, said the importance of the SEC to safeguard investment confidence could not be overstated.
"The undersigned stand ready to assist the Commission combat efforts to weaken or roll-back the important investor protection provisions of Dodd-Frank," it added.
Areas the signatories, including several public sector schemes based in the US, would like to see addressed are issues such as the renewal of rules for universal proxy access the investors see questioned by a recent court decision.
"Proxy access is a fundamental shareowner right to nominate director candidates who can be considered on a level playing field with board or management candidates," the letter said.
It also called for an "accountable and transparent" ratings system, forcing full disclosure of data and models used by ratings agencies to assess company and sovereign ratings.
It said an independent mechanism should track the "accuracy" of ratings agencies and that a study should be completed exploring the financing of alternatives to the current arrangements.
The group also called for compliance from companies on climate risk disclosure, as well as the SEC's work on the international reporting standards, which it deemed "fundamental" to investor protection in a global market.