Legal pensions challenge set to be launched on Monday



Monday will see a group of unions representing public workers from the police and other public sectors launch a huge legal challenge to the Governments planned changes affecting the way pensions are calculated.

The chancellor’s first budget in June last year saw him switch the increases in public sector pensions to run in line with the Consumer Prices Index, rather than the Retail Prices Index as it had before.

The move, which is expected to cost the average pension 15% of its retirement income will save the government millions, with one estimate suggesting the move wiping £200billion off the total value of state pensions.

The new rules kicked in at the beginning of April but not all schemes have followed suit, with 60% of pension funds tied into the Retail Price Index because of the wording in their agreements.

Pension Analyst Laith Khalaf from Hargreaves Lansdown said, “The cost to members will vary with age. The younger you are, the worse the impact will be as there are more years for the difference between RPI and CPI to change your pension. Someone who has yet to retire or has just retired loses more than someone who has been drawing their pension for 20 years.”

The biggest problems come at companies like British Airways which have two different pension schemes, both with different rules. The APS (Airways Pension Scheme) they run has 27,000 members, all who only saw their pension increase by the CPIs 3.1%, rather than the 4.6% they would have got under the old rules.

With plans to challenge the legality of the changes, it will be interesting to see which pension schemes follow the lead taken by APS among others and make the changes now, and which ones will wait for the outcome of this case.

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