The latest in a line of cases considering the legalities and practicalities of switching from RPI to CPI for revaluation and pension increases, Buckinghamshire v Barnardo's looks at whether the fact that RPI is no longer a "recognised" index means that the scheme trustees can replace it with CPI. The answer in this case was no but, as with any RPI/CPI switch case, it turns on the wording of the scheme's particular rules.
The background to the case is that, in March 2014, the Office for National Statistics announced that RPI no longer met the standard to be designated as a "national statistic". RPI has however continued to be published.
Very broadly, the Barnardo's rules provided for revaluation and indexation by reference to RPI "or any replacement adopted by the Trustees without prejudicing Approval". The key issue was whether this means "RPI or any index that replaces RPI and is adopted by the Trustees" or "RPI or any index which is adopted by the Trustees as a replacement for RPI".
The judge (Warren J) rejected the second interpretation. The scheme rules only allowed the Trustees to adopt a different index once RPI has been "replaced". He found that there could only be a "replacement" of RPI once it had ceased to be published. The fact that it is no longer recognised as a national index does not amount to "replacement".
Although this decision turns very much on the particular rules of the Barnardo's scheme it will be relevant to trustees considering a switch where their rules make reference to "replacement" indices. Any trustees or employers considering moving from RPI to CPI should take detailed advice.
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