Switch from RPI to CPI ruled lawful, Teachers Union are appealing.
BBC News - Pension switch ruled lawful by High Court
The government's public sector pensions policy has been given a major boost following a ruling at the High Court.
Trade unions brought a judicial review of the way Consumer Prices Index (CPI) was now being used instead of the faster-rising Retail Prices Index (RPI) for pensions inflation proofing.
The High Court has ruled that the government's switch was lawful.
The decision affects the value of pension increases for millions of public sector pensioners.
The policy also saves the government many millions of pounds in the coming years and is a major area of disagreement amid the public sector pensions dispute.
Up to two million public sector workers went on strike on Wednesday.
Pension shift The new CPI inflation-proofing policy was first applied in April this year.
It saw pensioners in schemes covering civil servants, teachers, NHS employees, local government and others, receiving an increase of 3.1% instead of 4.6%.
On Tuesday, new projections published at the time of the Autumn Statement showed government is now assuming the gap between the measures will widen from 1.2 to 1.4 percentage points a year.
The Office for Budget Responsibility, the independent but government-funded economic forecaster, said that by 2016 the gap between CPI and RPI could be as high as 1.8 percentage points, predicting that CPI will go down to 2% by then, while RPI stays higher at 3.8%.
Lord Hutton's
independent report on public service pensions, whose final report was published earlier this year, calculated that the unfunded public pension schemes (a definition that included all but the local government scheme) would save £1.8bn a year in cash payments by 2015-16 due to the move to CPI.
However, that saving will be much greater if the OBR's forecast of a wider divergence between the two inflation measures proves to be true.
If state benefits and tax credits - also affected by the policy - are included in the calculations, then the average annual government saving could be £6bn. The decision does not affect how the state pension is increased each year.
Government lawyers argued that ministers are entitled to consider the CPI to be "a more appropriate measure of changes in the general level of prices".
The trade unions' lawyers had argued that the government had acted beyond its powers. The NASUWT teaching union said it planned to appeal the High Court's decision.