The Court of Appeal has declared that trustees of the
Barnardo's pension scheme cannot switch its indexed linked
payments from the Retail Price Index (RPI) to the Consumer Price
The Court stated that trustees could not change the index used
for revaluation and indexation purposes.
It was noted that the rules of the Barnardo's Pension scheme
did not permit trustees to switch from RPI to CPI as the
inflationary measure for increases to pensions in payment and
revaluation of deferred members' pensions.
The court made its decision with a 2:1 majority, with the
Chancellor dissenting to the ruling, taking a view that the
definition of the RPI in the Barnardo's scheme documents
maintains that the trustees could not change the index "unless
and until the RPI is replaced".
Wedlake Bell partner Clive Weber noted: "The
Court's ruling today will be a relief for members but
disappointing for employers. The decision is food for thought for
the current Parliamentary Select Committee enquiry into defined
benefit schemes, and the balance to be struck between employers and
members. The ruling also upholds previous judgments on member
protection: a power embedded in scheme rules to switch index is
outside the statutory protection for members' benefits. This
makes any new legislation permitting index switches politically
Pinsent Masons legal director and pensions expert Simon Tyler,
commented: "This ruling comes as a blow to the employers of
many pension schemes with inflation protection wording similar to
that considered in this case. Had the judgment gone the other way,
those employers could have seen a way forward in reducing scheme
"This case confirms that for many DB pension schemes, new
legislation is required to allow schemes to reduce liabilities on
removing some inflation protection for members. Since there is no
overriding statutory power allowing schemes to switch to CPI, this
option depends on the precise wording in each scheme's
A Barnardo's spokesperson said: "We are taking time to
consider the outcome and the options with our legal and financial
This article was first published in Pensions Age on 2 November 2016.
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