In July 2010 the Government declared that the Consumer Price Index (CPI), rather than the Retail Price Index (RPI), should be used when calculating the statutory minimum amounts by which pensions in payment should be increased, and deferred pensions should be revalued.
In a previous post we considered the High Court’s ruling on switching from RPI to CPI increases in relation to the Barnardo Staff Pension Scheme (the Scheme). In summary, the Scheme rules required pensions in payment to be increased, and deferred pensions to be revalued, by the “prescribed rate” being “the lesser of 5% and the percentage rise in the Retail Prices Index (if any)”.
“Retail Prices Index” was defined by the Scheme rules as “the General Index of Retail Prices…or any replacement adopted by the Trustees without prejudicing Approval”. The key question the High Court had to answer centred on the definition of the word replacement. The High Court took the view that the Scheme’s rules did not permit RPI to be substituted for CPI so long as RPI remained a published index. However, permission to appeal was granted.
The appeal has now taken place and the Court of Appeal, by a two to one majority, upheld the High Court’s decision. The Court of Appeal concluded that, on the construction of the Scheme’s rules, the Trustees did not have the power to substitute RPI for CPI “unless and until RPI is replaced”.
The appeal was therefore dismissed.
The Cross Appeal
In a cross appeal the members of the Scheme raised the point on Section 67 of the Pensions Act 1995 (Section 67). The question the Court of Appeal had to consider was whether, in the event that the Scheme’s rules had permitted the trustees to make a switch to CPI, that switch would have been in breach of Section 67.
To answer this question the Court of Appeal revisited the Qinetiq case and the Arcadia case. The Court of Appeal decided that, if there had been a discretionary power to switch indices, an exercise of that power would not breach Section 67. The cross appeal was therefore also dismissed, and in doing so, the Court of Appeal unanimously approved the decisions in Qinetiq and Arcadia.
It would appear that the specific wording of the Scheme rules, and the interpretation thereof, are ultimately the determining factors when deciding if RPI/CPI switches are permitted. Providing they are, trustees and employers will be relieved to hear that any switch will not breach Section 67.
However, an application for permission to appeal to the Supreme Court has been made. This therefore may not be the end of the RPI/CPI switch saga.
 Buckinghamshire & Ors v Barnardo’s  EWCH 2200 (Ch)
 Danks and others v Qinetiq Holdings Ltd & another  EWCH 570 (Ch)
 Arcadia Group Ltd v Arcadia Group Pension Trust & another  EWCH 2683 (Ch)