The High Court has decided that the Rules of two DB schemes in the Arcadia group gave the trustees and the employer a joint power to select an index other than RPI for the purposes of revaluing deferred pensions and indexing pensions in payment. The judge came to this conclusion notwithstanding the fact that the Rules expressly referred to RPI.
The schemes' Rules, broadly, provided for pension increases and the revaluation of deferred pensions to be calculated by reference to "the Government's Index of Retail Prices (or any replacement of that Index)". The Retail Prices Index was defined as "the Government's Index of Retail Prices or any similar index satisfactory for the purposes of the [HMRC]" (it should be noted that there had been some variation in how the relevant Rules were framed over the life of the two schemes).
The judge took the view that, when read in context, the Rules did allow an index other than RPI to be selected and that this power could be exercised jointly by the trustees and the employer. In addition, the exercise of this power was not restricted to circumstances in which RPI had been discontinued or replaced.
This is a potentially helpful decision for schemes who are considering whether to switch to CPI (or another alternative such as RPIJ). However, the ability of a scheme to switch indices will depend on how its particular Rules are drafted. Where, for example, a scheme refers expressly to RPI, and does not provide any alternatives, trustees and employers' ability to switch is likely to be much more restricted.