The Court of Appeal yesterday handed down the long-awaited judgment in BT plc v BT Pension Scheme Trustees Limited & Or.
The case raised a number of issues important to the pensions industry and of wider interest, principally the question of whether on a proper construction of the pension index switching rule contained in the BT Scheme rules, BT had a discretion to determine whether or not RPI had ‘become inappropriate’ within the meaning of the rule. The rule was silent on the identity of the ultimate decision maker, and the concept for determination was in the nature of an evaluative judgment. If RPI has become inappropriate, BT come under a duty to select a suitable alternative measure of inflation. The issue is of real significance to the pensions industry given the significant cost associated with indexing pensions in payment.
The CA held at  that the question whether RPI had become inappropriate was an objective state of affairs to be determined by the Court in case of dispute between BT, the Trustee and members, in the nature of a condition precedent. The CA also held at  that, whilst widely discredited (including by the Office for National Statistics, the keeper of official statistics such as RPI) and known to include an upward bias of 1% compared to CPI, RPI had not become inappropriate within the meaning of the rule, including because the statistical flaws in RPI giving rise to the bias were known about prior to the rule first being adopted by BT and the Trustee in 2002, who are thereby taken to have ‘re-based’ the concept of appropriateness by reference to RPI as it was in 2002. The CA also made important observations about Parliamentary privilege at ff.
3VB’s Farhaz Khan acted for BT led by Andrew Spink QC and Dinah Rose QC, instructed by Keith Webster and Neal Gibson of CMS Cameron McKenna Nabarro Olswang LLP.