Barnardo’s loses pension scheme appeal in Supreme Court
The Supreme Court ruled yesterday that children's charity Barnado's can not change the index it uses to protect pensions from inflation.
In a unanimous verdict judges ruled the charity may not switch the measure of inflation used on its pension scheme from the retail prices index (RPI) to the consumer prices index (CPI). The move to the CPI, a cheaper measure of inflation, would have enabled a reduction of the scheme’s deficit.
Barnardo’s had argued the wording of its pension scheme rules allowed for the change in indexation. But the Supreme Court rejected this argument, which centred on the use of the word "replacement", ending the case after more than two years.
In his ruling, Lord Hodge said: “While, since 1991, the RPI has fallen from favour as an appropriate measure of the cost of living, it is not appropriate to use hindsight of such post-execution events to assess whether a provision makes good commercial sense.”
The Office of National Statistics (ONS) dropped the RPI in 2013 and now discourages its use.
But Jane Kola, partner at law firm ARC Pensions Law, said while the ruling marks the end of the road for Barnardo’s, it may not impact other schemes.
“The decision confirms that the index to be used to increase benefits in both deferment and in retirement depends on the exact wording of scheme rules as they apply to members,” she said.
She added: “There is no 'hard and fast rule' that schemes can or can’t change their index. Schemes need to ensure that they have looked at all of their rules, not just the last set.”