Three major UK corporate defined benefit (DB) pension funds are going ahead with seeking a judicial review of the government’s plan for reforming the Retail Prices Index (RPI).

In November, HM Treasury and the UK Statistics Authority (UKSA) announced the decision to effectively replace RPI with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) from 2030. RPI tends to be 1% higher than CPIH.

In a statement issued today, the trustees of the three pension funds – BT Pension Scheme, Ford Pension Schemes and Marks and Spencer Pension Scheme – said the decision to pursue a legal challenge had not been taken lightly, but that they believed a judicial review was necessary to protect scheme members and assets from the effects of the decision.

They said they believed the “far-reaching” implications of the government’s decision had not been fully considered.

Citing an estimate from Insight Investment, they said the reform would spell lower retirement income for more than 10 million DB pensioners, with women due to suffer most for life expectancy reasons.

The reform is also seen as likely to lead to an increase in scheme funding shortfalls because it reduces the value of RPI-linked assets. This in turn would add pressure on sponsoring employers, the trustees pointed out.

The government has said there would be no compensation for holders of index-linked Gilts issued from 2002.

UKSA and the Chancellor have 21 days to respond to the claim for a judicial review once it is served. The court will then decide whether a claim can proceed to a full hearing.

The original deadline for filing a claim for judicial review was in February, but the three pension funds requested a six-week extension. The government is said to have asked them to do this to give it more time to prepare its defence given the complex nature of the case.

A spokesperson for HM Treasury today said: “As this matter is now before the courts it would not be appropriate to comment.”

The three pension funds have 450,000 members and £83bn (€96bn) of assets between them. BTPS is the largest, with £57bn in assets under management.

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