Unions said on Friday they planned to appeal after losing a legal challenge to plans to base annual increases in public sector pensions on a lower inflation index, the latest clash with the coalition government.

The High Court in London said a change to using the Consumer Price Index rather than the retail price measure was lawful for working out increases to benefits and public sector pensions.

The coalition announced the switch in June 2010 and has calculated it could save 10.6 billion pounds a year in payments, with pensions accounting for around 2 billion of that sum.

At a time when public sector employees are being forced to bear the burden of the financial crisis, the unions will not allow this unfair and, in our view, unlawful breach of the contracts of millions of workers to rest, said a statement issued on behalf of six unions.

Unions staged a one-day strike on Wednesday in protest over plans to make them work longer and pay more for their pensions.

The government was pleased with the ruling.

The Government welcomes the High Court's acceptance of its decision to use the Consumer Prices Index for inflation-proofing certain pensions and benefits, a spokeswoman said.

Consumer price inflation was 5.2 percent in September, the month used as the base, against RPI of 5.6 percent. The CPI figure excludes items such as mortgage interest payments.

(Reporting by Keith Weir)