20 March 2012
The change to the Consumer Price Index (CPI) from the usually-higher Retail Price Index (RPI) inflation measure to increase pensions annually also impacts on private sector workers.
The supermarket chain Tesco announced a similar change to its pension scheme last week.
The unions mounted the legal challenge on behalf of millions of public sector workers after the switch - effective from next month - was announced by chancellor George Osborne in his 2010 budget without consultation or negotiation.
The unions have always contended it was a deficit reduction measure, rather than a change to a better system as the government claim.
CPI is around 1.2% lower on average than RPI, but is estimated to widen to 1.4% according to the Office of Budget Responsibility, meaning the loss to existing public sector pensioners will be more than 15% - equating to a loss of about £15,000 over an average retirement.
This attack is on top of a lengthy pay freeze and the threat of job cuts across the public sector.
The judicial review started in the High Court last October. The unions argued that the imposed move was not permitted under social security legislation, and that it reneged on assurances given by successive governments that RPI would apply.
While all three High Court judges agreed with the unions that deficit reduction was the motivation for the switch, two of them said the secretary of state was within his rights to take into account public finances.
Now the Court of Appeal has ruled that the government was entitled to take into account the national economic situation when deciding to adopt CPI from this year.
The court also ruled that, even if the national economic situation had been discounted, the government would still have the adopted CPI on the basis of the advice it had received.
The organisations that took the case were PCS, the Prison Officers' Association, the Fire Brigades Union, the teachers' union NASUWT, and the general unions Unite and Unison.
The unions will now be considering their next steps.
The PCS executive announced yesterday that it was seeking to co-ordinate strikes in April, across the public sector, in protest at pension changes including the switch from RPI to CPI.
An e-petition against the change tabled by PCS member Jim Singer has had more than 111,000 signatures. You can still sign