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Northern Ireland
FDA & Ors, R (on the application of) v Secretary of State for Work and Pensions & Anor [2012] EWCA Civ 332
Published on: 23/03/2012
Issues Covered:
Pensions
Article Authors The main content of this article was provided by the following authors.
Background In June 2010, the government decided, with effect from April 2011, to base the annual inflation up-rating of public sector pensions by reference to the consumer price index (CPI) instead of the historically used retail price index (RPI). One of the drivers behind the decision was the government's requirement that individual departments find ways in which to reduce expenditure in order to reduce the United Kingdom's deficit. Claimants against this decision consisted of individuals, trade unions and other bodies that represented large sections of public sector employees. They sought judicial review of the government's decision to adopt CPI referenced uplifts and the statutory orders that implemented that decision. The claim was dismissed and the appellants appealed.They submitted that: (1) section 150 of the Social Security Administration Act 1992 (the „Act‟) did not permit the annual inflation adjustments to be made by reference to CPI because of the way in which CPI was compiled; and (2) in making the decision to make the annual inflation adjustments by reference to CPI, the defendant Secretary of State had taken into account an irrelevant consideration, namely the effect on the national economy. 101The appeal was dismissed on the grounds that section 150(1) of the Act would have required clear exclusionary or limiting words before it could fairly be concluded that Parliament had intended that such an index could not be invoked by the Secretary of State for the purposes of that section. Instead, provided he acted rationally and took all appropriate, and no inappropriate, matters into account, section 150(1) of the Act left it to the Secretary of State to select the method.In the instant case, it could not be said, nor was it contended by the claimants, that the weighting method adopted by CPI was irrational. It was also unrealistic for the claimant to contend that the Secretary of State had been required to ignore the wider economic realities, irrespective of the circumstances, when carrying out his functions under section 150 of the Act. The exercise required by section 150 was macro-economic in nature and had the obvious potential of having a significant effect on the country's finances. Giving the lead judgement, the Master of the Rolls concluded:"It was, in my view, open to him [the Secretary of State] to take into account the effect on the national economy, provided that, in his rational view, (i) the index which he selected was not significantly less suitable for section 150 purposes than the alternative, (ii) the choice of index would have a significant effect on the national economy, and (iii) the state of the national economy justified it being taken into account. It seems to me that those three requirements were plainly satisfied here. The fact that the factor which initially drove the selection of CPI was the effect on the national economy does not alter the fact that CPI was considered on its merits to be an appropriate index for making the section 150(1) estimate for 2011."The decision of the Divisional Court was therefore affirmed. In consequence, the change to using the CPI will result in considerably lower index-linked pensions for retiring civil servants but also considerably lower employer contributions to the pension fund over the next few years.http://bit.ly/GF7crd

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Disclaimer The information in this article is provided as part of Legal Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct at 23/03/2012
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