Arcadia Group Ltd v Arcadia Group Pension Trust Ltd & Anor

Where pension scheme rules define the relevant index as RPI or any similar index satisfactory for HMRC, the wording can confer a power to select another qualifying index. The power is not confined to circumstances in which RPI has been discontinued or replaced. Its exercise may require the joint concurrence of the employer and scheme trustee, particularly where other benefit-altering powers are jointly controlled. CPI may qualify as a similar and satisfactory index where its use is government-endorsed, statutorily adopted and not prejudicial to HMRC. Such a selection does not necessarily constitute a detrimental modification of members’ subsisting rights under section 67 of the Pensions Act 1995, where the rights are to index-linked increases under the defined term rather than specifically to RPI.

Arcadia Group Limited sought declarations concerning the interpretation of the indexation provisions in the AGPS and AGSEPS occupational pension schemes. The schemes’ rules referred to increases and revaluation by the Retail Prices Index, defined as the Government’s RPI or any similar index satisfactory for Inland Revenue or HMRC purposes.

The issues were whether the definitions permitted selection of an alternative index, who could exercise that power, whether CPI qualified, whether section 67 of the Pensions Act 1995 prevented its use for past service, and, for the AGSEPS, when a 2006 amendment took effect.

1. The definitions of “Retail Prices Index” conferred a power to select an index other than RPI. Although the wording could accommodate replacement of RPI, it was not limited to that situation. The relevant question was the scope of the power, not whether any power existed.

2. The power was exercisable by Arcadia and the trustee of the relevant scheme jointly. The schemes’ other powers affecting members’ benefits required trustee involvement, and it would be anomalous for the less explicit index-selection power to be exercisable by Arcadia alone.

3. CPI was a similar index to RPI. It was also satisfactory for HMRC purposes in relation to pension increases. In relation to AGPS deferred-pension revaluation, HMRC’s absence of an express confirmation was not decisive. CPI was satisfactory because there were no proper or reasonable grounds on which HMRC could regard it otherwise, having regard to registration rather than approval, Government endorsement and its use for statutory revaluation.

4. Section 67 of the Pensions Act 1995 did not prevent selection of CPI for benefits derived from past service. Following Danks v QinetiQ Holdings Ltd [2012] EWHC 570 (Ch), members had subsisting rights to increases and revaluation consistent with the scheme definition, but not an accrued right specifically to RPI. Aon Trust Corpn v KPMG [2005] EWCA Civ 1004 was distinguishable.

5. The AGSEPS amendment to rule 13.2 took effect on 31 March 2006. Members who had left service before that date were therefore outside the power of selection created by the amended definition.