High Court judgment: Buckinghamshire and others v Barnardo’s and others  EWHC 2200 (Ch)
The High Court considered a scheme set up in 1968 by Barnardo’s which provided final salary benefits for its staff. After closing the scheme to new joiners and converting to a career average revaluation earnings (CARE) basis for future service benefits in 2007, the scheme was then closed to accrual on 1 May 2013.
When Barnardo’s, the scheme’s principal employer, suggested that the trustees replace RPI with CPI for indexing and revaluing deferred pensions and pensions in payment, a Part 8 claim was brought by the trustees regarding the interpretation of the scheme’s rules highlighting their concern about their powers relating to the switch. Barnardo’s were of the opinion that the trustees had the power to effect the amendment.
The Court considered that the key issue was whether, according to the scheme’s rules, the definition of “Index” meant either:
- RPI or any index that replaces RPI and is adopted by the trustees; or
- RPI or any index that is adopted by the trustees as a replacement for RPI.
Contrary to Barnardo’s opinion, the Court held that there could be no “replacement” of RPI within the meaning of the definition of “Retail Price Index” in the rules as long as RPI remained an officially published index.
The Government’s switch in 2011 to use CPI as the measure of inflation instead of the RPI should be treated with caution. The case is a good illustration that schemes need to consider very carefully when switching to CPI and should review, as a matter of best practice, any changes they have already made.