Court Of Appeal Concludes That RPI Has Not Become Inappropriate For The BT Pension Scheme

BT has lost its attempt to convince the Court of Appeal that it should be able to move away from the retail prices index (RPI) for indexation of benefits for one of the sections of its pension scheme. The Court of Appeal upheld the High Court judgment that RPI had not become an inappropriate measure of inflation for indexation of pension benefits due under the BT Pension Scheme.

What did the Court of Appeal hold?

1. BT's appeal is dismissed unanimously and the High Court's decision stands

   Asplin LJ said that the High Court judge "was right to come to the conclusions he did" and was entitled to conclude that the RPI has not become inappropriate for the purposes of calculating increases in pensions in payment under the BT Pension Scheme.

2. The question of whether RPI had become inappropriate was not for BT or the Trustee to determine

   Asplin LJ said this wasn't a subjective question: "whether RPI has become inappropriate is an objective state of affairs which, if it exists, triggers the obligation to choose another measure of the cost of living."

3. Application of a textual approach following Lord Hodge in Barnardo's v Buckinghamshire and others

   Whilst it might have been convenient or better for BT to have a role in determining the appropriateness of RPI, the rule in the BT Pension Scheme did not explicitly provide for this. The 2003 Rules (where BT did have a role) were not relevant in interpreting the 2016 Rules.

4. Evidence from the House of Lords was admitted to Court

   Issues regarding parliamentary privilege were considered. However, these did not prevent evidence which post-dated the High Court trial being admitted before the Court of Appeal.

   What was the case about?

   The proceedings concerned the appropriate cost of living index to be used in calculating increases to pensions in payment under Section C of the BT Pension Scheme (affecting around 83,000 members). Pension increases for these members are currently calculated and paid on an RPI basis. A change in the rate indexation for Section C member could reduce liabilities in the scheme by c. £1.4 billion (with an average impact of £15,000 per member, according to Unite). Sections A and B have already moved to consumer prices index (CPI).

   BT, the sponsor of the pension scheme, sought directions from the Court as to whether the CPI (which generally produces a lower measure of inflation than RPI) could be applied in place of RPI. Arguments were put forward by BT ,acting in its own capacity and representing all members whose interest it was that increases should no longer be linked to RPI, and by a Representative Beneficiary acting on behalf of those members whose...