Hogan Lovells

Key Dates

Judgment given by the Supreme Court on 7 November 2018.

Court of Appeal judgment given on 2 November 2016.

High Court judgment given on 28 July 2015.


Summary

The Supreme Court has dismissed the appeal from a decision of the Court of Appeal that the scheme rules on indexation and revaluation of pensions did not give the trustees power to switch from RPI to CPI, as long as RPI remained an officially published index. 

Background

The rules provided that for indexation of pensions in payment and revaluation of deferred pensions by the "prescribed rate", defined as the lesser of 5% and "the percentage rise in the Retail Prices Index (if any)".

"Retail Prices Index" was defined (in rule 53) to mean the "General Index of Retail Prices" or "any replacement adopted by the Trustees without prejudicing Approval". The second sentence of rule 53, dealing with how to increase in line with RPI, referred to how a calculation would be made if the RPI was "replaced or re-based".

At first instance, the High Court held that the rules did not give the trustees power to switch from RPI to CPI, as long as RPI remained an officially published index.  This decision was upheld by the Court of Appeal

Judgment

The Supreme Court dismissed the appeal. The terms of the rules did not give the trustees a generalised discretion to switch the applicable index. The correct construction of rule 53 was that the "replacement" of RPI must precede "adoption" by the trustees. Both replacement and re-basing had to be by the same person – the relevant authority, not the trustees, as the trustees did not have the power to re-base.

The cross-appeal, (that even if the trustees did have power to change to CPI, exercise of that power to switch the index applicable to future increases would have been inhibited by section 67 of the Pensions Act 1995) was not addressed.



Date Accessed: 28/05/2022