Pension challenge judges also hit by index change

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The Government was yesterday accused in the High Court of illegally changing the way annual pension increases are calculated for public sector workers.

Scores of angry pension fund members gathered under union banners outside the Royal Courts of Justice in London to protest as trade unions launched a mass challenge to the decision to use the consumer price index (CPI), instead of the traditionally higher retail price index (RPI), to take account of rises in the cost of living.

Union leaders say the switch could cost pensioners tens of thousands of pounds.

In court Lord Justice Elias, sitting with Mr Justice McCombe and Mr Justice Sales, said the judges themselves – as civil servants – were also affected by the changes. Lord Justice Elias asked whether any party objected to them presiding over the three-day application for judicial review. There were no objections.

The switch, which came into effect in April, was announced by Conservative Chancellor George Osborne in the June 2010 budget.

Unions say that because the CPI is about 1.2 per cent lower on average than the RPI, the loss to existing public sector pensioners will be about 15 per cent – with the change already affecting staff paying into career average schemes.

The unions are protesting that the changes were introduced without consultation or negotiation, as a deficit reduction measure.

Yesterday Michael Beloff QC told the judges a major Government policy was under challenge.

Mr Beloff and fellow QC Nigel Giffin are representing tens of thousands of public sector workers belonging to a variety of pension schemes, including those for police, teachers, firefighters, NHS staff and the civil service.

Mr Beloff said the challenge was to whether current legislation allowed the Work and Pensions Secretary, Iain Duncan Smith, and the Treasury – as custodians of the public purse – to switch to the CPI.

Arguing that it did not, Mr Beloff said: “The consequences of that change, if valid and effective, is to diminish what would otherwise be a pension expectation and entitlement of those whose interests we represent and is obviously an issue of considerable public importance.”