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Unions challenge 'unlawful' pensions indexation switch in UK court

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  • Unions challenge 'unlawful' pensions indexation switch in UK court

UK - A number of unions and pensioner rights groups have launched a High Court challenge to overturn the "unlawful" switch in indexation from the retail prices index (RPI) to the lower consumer prices index (CPI).

The judicial review, which got underway in London yesterday, was launched by six public sector unions, including Unison and Unite, as well as teachers' union NASUWT and representatives from fire and police bodies.

The unions argue that CPI, on average more than 1% lower than RPI, will lead to a significant drop in benefits for pensioners - with the switch already having reduced the liabilities calculated by a number of private sector schemes.

They also claim the change goes back on previous government guarantees that RPI would be used to up-rate benefits.

Most recent inflation figures for September revealed only a 0.4 percentage point difference between the two indices, with RPI at 5.6%.

KPMG predicted this would lead to benefit payments not falling as dramatically as initially assumed by pension funds.

General secretary of the Public and Commercial Services Union Mark Serwotka highlighted the union challenges to these and other changes proposed by government for public sector pensions. 

Referencing a proposed strike at the end of November, he warned it would be the most coordinated strike of a lifetime in an effort to "show how out of touch millionaire ministers are with the lives and concerns" of the workforce.

He said: "The switch from RPI to CPI is just another example of how this government wants public servants, pensioners and people entitled to benefits to pay the heaviest price for the recession."

Referencing reforms agreed under the previous Labour government following 2008 proposals, he added: "For new entrants to the civil service, it means an immediate cut in their pensions, ripping up an agreement we reached just a few years ago."

Matt Wrack, Serwotka's counterpart at the Fire Brigades' Union, argued that pensioners were being forced to bear an unfair burden as the result of the recent financial crisis and called the indexation change "unlawful".

A pensioners' group supporting the action - the Civil Service Pensioners' Alliance - meanwhile criticised the government for "broken promises" that RPI indexation would remain in place.

The Alliance's head Mike Duggan said: "The Secretary of State has gone beyond his legal authority in selecting CPI as the indexation for pensions up-rating."

Echoing industry-wide criticism on the handling of the indexation switch - which was announced last year before the parliamentary recess got underway and led to concerns over an investment mismatch due to the lack of CPI-linked bonds issued by the Debt Management Office - Duggan criticised the lack of consultation on the change, which came "completely out of the blue".

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