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Pension inflation move challenged

Posted by TerranceV | Business | Posted on February 21st, 2012

Unions representing public sector workers are appealing against a legal decision about how pensions are protected against inflation.

It saw pensioners in schemes covering civil servants, teachers, NHS employees, local government and others, receiving an increase of 3.1% instead of 4.6%.

New projections published at the time of the Autumn Statement showed the government is now assuming the gap between the measures will widen from 1.2 to 1.4 percentage points a year.

If someone retired on an annual pension of £10,000 a year – a typical figure for a teacher – then over 20 years the uprating of their pensions by 2% (the Bank of England's CPI target) would see them accrue total pension payments of £245,500.

If a 3.4% RPI figure was used instead – because this would be 1.4 percentage points higher – the pensioner in question would receive £284,923. That's a difference of £39,423 over 20 years.

Two groups, mainly consisting of unions, launched the initial legal action against the change. The Fire Brigades Union, NASUWT, Prison Officers Association, Public and Commercial Services union, Unison and Unite make up one group, while the other consists of Prospect, the FDA, GMB, Police Federation, National Association of Retired Police Officers and the Civil Service Pensioners' Alliance.

The judges agreed to allow the National Union of Teachers, Association of Principal Fire Officers and National Federation of Occupational Pensioners to join the challenge.

Six unions are taking the case to the Court of Appeal.

Brian Strutton, national officer of the GMB, said: "GMB consider that the High Court was wrong in fact and in law regarding this change to long-standing employment contracts, which cuts pensions in payment by 15% and more.

"That is the reason GMB, with the other unions, is mounting this robust legal challenge to that decision."