High Court allows judicial review of Government plans to replace RPI with CPIH

The High Court has announced that a judicial review will be heard on the Government’s decision to replace Retail Prices Index (RPI) with the housing cost-based version of the Consumer Prices Index, known as CPIH, from 2030.

The hearing is expected to take place in the Summer of 2022 following an application for review brought by the trustees of the BT Pension Scheme, Ford Pension Schemes and Marks and Spencer Pension Scheme, which together represent £83bn of assets for its 448,768 members.

The legal challenge comes following confirmation from the Government that RPI would be reformed in its comprehensive spending review last November. The trustees argue that a review is however necessary because the proposed change will effectively reduce payments to their members in addition to reducing the value of RPI-linked assets held.

The trustees will be required to contest the government’s case, expected in early February, and defend scheme members and scheme assets from the detrimental effects of a decision which they do not believe have been fully considered.

The government has refused to offer compensation to index-linked gilt holders, noting that there would be no change to the contractual terms with RPI still being used to determine the index ratio.

Calculations made by Insight Investment show that the move to align RPI with CPIH would “result in an unintended transfer of wealth from index-linked gilt holders to the UK government of around £100bn and reduce pension transfer values and lifetime incomes by 10-15% or more”.