RPI/CPI SWITCH: LEGAL CHALLENGE
Following consultation with our fellow litigants (FDA, Prospect, NUT and GMB), we have all concluded that, although we might be able argue about the fine detail of the Court of Appeal judgement, the prospects of our being able to get a different judgement from the Supreme Court on the substantive issues is extremely remote. Therefore, we have all decided NOT to appeal to the Supreme Court. We have now been informed that the other group of litigants has also decided not to appeal.
We know that this will come as a disappointment to you but we do not wish to incur further substantial legal expense on what would be a futile exercise.
Although we have lost the legal battle, we will continue to campaign politically for a return to RPI indexation at some future date.
RPI/CPI SWITCH: E-PETITION
The e-petition calling for immediate restoration of RPI secured more than 110,000 signatures. It was debated in the House of Commons on 01 March 2012 but was lost by 232 votes to 33.
PENSIONS UPRATING FOR 2012
DWP has confirmed that both the basic state pension and the additional state pension will rise by 5.2% from 09 April 2012.
Cabinet Office has confirmed that public sector pensions (including Civil Service pensions) will rise by 5.2% from 09 April 2012.
INFLATION
In the year to March 2012 the RPI had risen by 3.6% and the CPI had risen by 3.5%.
In the year to January 2012 total pay (including bonuses) had risen by 1.1% and regular pay (excluding bonuses) had risen 1.6%
RPI/CPI SWITCH: FINANCIAL PACKAGES
Unfortunately, the other group of litigants raised the question of contractual rights and legitimate expectation in their original application for judicial review. On the advice of our own lawyers, our own group of litigants did not raise those issues. We regret to say that the judgement on those issues is likely to prejudice our claim for compensation for those who made investment or career decisions based upon their expectation of continued RPI indexation. However, the door is not fully closed and we hope to be in a position to give you further advice before the end of the month.
A REVISED CPI TO INCLUDE HOUSING COSTS
The Coalition Agreement “Our Programme for Government” said: We will work with the Bank of England to investigate how the process of including housing costs in the CPI measure of inflation can be accelerated. The UK Statistics Authority has said: We believe that the CPI should become the primary measure of consumer price inflation but only when the inclusion in the index of owner occupiers’ housing costs has been achieved. The Government has said: As and when the Office of National Statistics comes up with alternative measures, we will certainly look at them, but that is without prejudice at this stage because the work is ongoing.
We continue to be well advised by statisticians and economists and we are in touch with the UK Statistics Authority and with the Royal Society of Statisticians. However, the necessary work is not expected to be completed before the middle of 2012. Any revised CPI is expected to fall between RPI and CPI, perhaps halfway, but it is too early to say.
INDEX-LINKING OF PUBLIC SECTOR PENSIONS
The index-linking arrangements for public sector pensions stem from the Pension (Increase) Act 1971. The law is complicated but it has had the effect of ensuring that each April public sector pensions have been increased in line with the Retail Prices Index, as recorded for the previous September, so as to maintain their purchasing power. The RPI link has been applied since 1972, employees have been led to believe by pension scheme literature that the RPI link would be maintained and many have made financial choices based on that understanding. Following much media speculation about the future of the current arrangements, we sought clarification from the three main political parties about their intentions and we received the following assurances.
At a meeting held on 30 March 2010, Angela Eagle said on behalf of the Labour Party "Following the agreement for change reached with the unions in 2005, we are satisfied that public sector pensions are affordable, sustainable and fair. We have no plans to change the current index-linking arrangements."
In a letter dated 12 April 2010, Steve Webb said on behalf of the Liberal Democrats "We are very clear that all accrued rights should be honoured: a pension promise made should be a pension promise kept. Therefore we would not make any changes to pension rights that have already been built up. I have confirmed that I regard accrued index-linked rights as protected."
In a letter dated 27 April 2010, Philip Hammond said on behalf of the Conservatives "Indexation of pensions in payment is an established part of pensions legislation. The Conservative Party has no plans to change the current index-linking of public sector pensions in payment. We agree with the view that the right to indexation of pensions already accrued is part of the accrued pension rights and those rights will be protected. Our proposed £50,000 cap on public sector pension rights accrued was always intended to be a real-terms cap and therefore will be subject to indexation to reflect inflation. It would make no sense to express a long-term cap on pensions in nominal terms."
Notwithstanding these assurances, the Emergency Budget said the following:-
Indexation of benefits and tax credits
The Government will use the Consumer Prices Index (CPI) for the price indexation of benefits and tax credits from April 2011. This change will also apply to public service pensions through the statutory link to the indexation of the Second State Pension. The Government is also reviewing how the CPI can be used for the indexation of taxes and duties while protecting revenues.
State Pension
The Government will uprate the basic State Pension by a triple guarantee of the highest of earnings, prices or 2.5 per cent from April 2011. The CPI will be used as the measure of prices, consistent with the Government's decision to index all benefits and tax credits by the CPI, although the basic State Pension will increase by at least the equivalent of the Retail Prices Index (RPI) in April 2011 to ensure its value is at least as generous as under previous uprating rules. The standard minimum income guarantee in Pension Credit will increase in April 2011 by the cash rise in a full basic State Pension.
The comparison of RPI/CPI September figures since 2000 has been as follows:-
RPI +3.3%; +1.7%; +1.7%; +2.8%; +3.1%; +2.7%; +3.6%; +3.9%; +5.0%; -1.4%
CPI +1.0%; +1.3%, +1.0%; +1.4%; +1.1%; +2.5%; +2.4%; +1.8%; +5.2%; +1.1%
Since CPI is usually well below RPI, a move to CPI would have a disastrous affect on both our public sector and state pensions.
We have asked friendly MPs to lodge a suitable Early Day Motion. EDM 1032 has now been laid and is couched in terms designed to secure maximum cross-party support. You will see that it does not go as far as supporting the retention of RPI but asks for a proper evaluation before any changes are made. It will not preclude us from continuing our campaign for retention of RPI. Indeed, it will provide us with another avenue for arguing our case. Therefore, we urge all members to contact their MPs to ask them to add their signatures to EDM 1032. I attach a draft letter for members to use. It is important that members include their full address at the top right-hand corner and in any e-mail which they might send. You can find your MP on the Parliamentary website http://www.parliament.uk/mps-lords-and-offices/mps/
EDM 1032
That this House notes the Government's proposal to use the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) for the price indexation of benefits, tax credits and public service pensions; further notes that the CPI is consistently lower than the RPI; expresses concern over the impact that this will have on the incomes of pensioners and other vulnerable groups; recognises the concerns held by the Royal Statistical Society and the UK Statistics Authority that CPI excludes many housing costs which are borne by the majority of pensioner households; and calls on the Government to take these concerns into account and postpone the change from RPI to CPI until the appropriateness of CPI as a measure of price increases borne by pensioner households can be fully evaluated.
If you are not yet a member of the Alliance and your pension is paid by Capita, please click here for an application form. If your pension is not paid by Capita or if your pension is not yet in payment, please ring us on 020 8688 8418 and ask for a direct debit application form.
If you have old colleagues who are not yet members of the Alliance, please ask them to join and take an active part in protecting their pension benefits.
ACCRUED PENSION ENTITLEMENTS
The courts have ruled that occupational pensions are deferred salary and, therefore, are protected by contract.
Section 2(3)of the Superannuation Action 1972, as amended, (which relates to our Civil Service pension scheme) says "No scheme under the said section 1 shall make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity,in so far as that amount is directly or indirectly referable to rights which have accrued (whether by virtue of service rendered, contributions paid or any other thing done) before the coming into operation of the scheme unless the persons consulted in accordance with section 1(3) of the Act have agreed to the inclusion of that provision." The Government would have to consult the Alliance and we would NOT agree to any such reduction.
Protocol 1, Article 1 of the European Convention of Human Rights (incorporated into the Human Rights Act 1998) says:-
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
The courts have ruled that pensions are "possessions" and, therefore, enjoy the protection of the Act. This applies both to pensions already in payment and to pension entitlements already accrued but not yet in payment.
The major political parties have made the following commitments:
Conservative Party (Theresa May 23 June 2009 to CBI Pensions Conference)
"And one thing on which we are absolutely clear is that accrued benefits would be protected."
On 10 September 2009 Philip Hammond repeated the commitment in similar terms.
Liberal Democrats (Nick Clegg 23 July 2009 A Fresh Start For Britain)
Public Sector Pensions. "We will honour all commitments which have already been made but examine ways to keep the cost of of future pension obligations, particularly to the higher paid, under much tighter control."
Labour Party (Cabinet Office Briefing 31 July 2009 Q&A on Reform of the CSCS)
"We have recently completed a major reform of the Civil Service pension arrangements and have no plans for further changes."
CALL TO ACTION
Call to Action (PDF)
In conjunction with our colleagues in Unite, the Federation, we launched our Call for Action seeking improvement for pensioners the following areas:
- Pensions - the introduction of phased increases in the State Retirement Pension to reduce means-testing and to lift pensioners above the official poverty threshold
- Health & Social Care - the establishment of a National Care Service focused on maintaining people's independence, supporting carers and financed fairly
- Transport - decent affordable public transport, with the concessionary bus pass to be used in place of the Senior Rail Card
- Social Exclusion - provision of the means so that older people are able to access services and play a full part in their local communities
- Energy - the elimination of fuel poverty and the proper regulation of energy tariffs
- Crime - actions to address crime and the fear of crime, so that older people are able to enjoy secure and peaceful retirements
We will continue to campaign on these points in the coming months.
OUTSTANDING CS PENSION ISSUES
The five long-outstanding Civil Service pension issues are:
- Widow's/widower's pensions for life, irrespective of re-marriage or co-habitation;
- Pensions for widows/ widowers of post retirement marriages;
- Pre-1948 service to count in full;
- The National Insurance Modification to be scrapped; and
- Pay-pause victims to be recompensed.
We have been campaigning on these issues for many years but have not yet persuaded the politicians. We will continue to make representations on all these issues whenever the opportunity presents itself.
NPC's PENSIONERS' CHARTER
We are affiliated to the National Pensioners' Convention and we support their Pensioners' Charter in the following terms:-
" Every man and woman on reaching state pensionable age will have the right to:
- a basic state pension set above the official poverty level and linked to average male earnings,
- a warm and comfortable home,
- free health care treatment based on clinical need and an annual comprehensive health check,
- free community care and services to assist living at home,
- free long-term care,
- free nationwide travel on all public and local transport,
- free education, access to and participation in leisure and cultural activities,
- goods, services and benefits without age discrimination,
- active engagement and consultation on national and local issues affecting older citizens,
- advocacy, dignity, respect and fair treatment in all aspects of their lives,
As a first step towards establishing these rights we call on the government to implement the Pensioners' Manifesto."
THE STATE PENSION
One hundred years ago the first 'pensioners' collected their state pension at the post office. It was set at 5 shillings a week and paid to men and women on reaching 70 years of age. Even though the pension was means-tested, it was a tremendous advance in social policy and the first time that the state had recognised that it had a responsibility to look after those in old age.
But today, figures show that after a century of the state pension, pensioner poverty remains:
- In 2007/8 2.5 million pensioners were living below the official poverty line and 600,000 pensioners were living in severe poverty;
- About two thirds of those pensioners living in poverty are women. Up to as many as 5m do not qualify for a full state pension because they were unable to pay the full national insurance contributions because of caring for their families or being in low paid employment;
- 62% of pensioner couples have an annual income of £15,000 or less, and 45% of all single pensioners have an annual income of £10,000 or less;
- In a recent EU survey, only pensioners in Latvia, Spain and Cyprus were more likely to fall into poverty than those in the UK. The Institute for Fiscal Studies concludes that the proportion of pensioners below the poverty threshold will remain at its current level for at least the next decade, despite government reforms;
- A recent survey by Scottish Widows found that 1 in 3 future pensioners will not have sufficient income to avoid poverty when they retire. Up to 9m workers currently have no other pension provision than that which will be provided by the state when they retire;
- Means-tested benefits fail to reach 1.8 million pensioners and about £2.8 billion a year remains unclaimed.
Therefore, we support the National Pensioners' Convention in their claim for the basic state pension to be set above the official poverty level of £176 a week, to be paid to all men and women and increased each year in line with earning or the retail price index, whichever is greater.
