The UK government has confirmed it intends to change the law to allow the payment of inflationary increases on pre-1997 pensions to members of the Pension Protection Fund (PPF), as well as Financial Assistance Scheme (FAS) members.
The government said it will legislate to enable the PPF to pay inflation increases, known as indexation, of up to 2.5% on pre-1997 compensation payments to PPF members. These will be made going forward, but no arrears will be paid, and will only apply to members whose original pension schemes provided for indexation on pre-97 pensions.
Minister for pensions Torsten Bell said the change will affect around 250,000 members of the PPF, boosting their pension payments by around £400 a year.
Mr Bell said: “We are tabling new clauses 31-33 and government amendment 87 to introduce prospective indexation of Pension Protection Fund and the Financial Assistance Scheme payments, that relate to pensions built up before 6 April 1997.
“These will be CPI-linked, capped at 2.5%, and apply to members whose former schemes provided for such increases.
“I want to thank the PPF too for their support on this measure, and for its implementation which rests with them. This issue has been long running, and many campaigners have been long campaigning on it.”
Bell acknowledged that this will not go far enough for some people, as the pensions industry has been campaigning for the government to enforce that defined benefit (DB) schemes should use surplus to pay indexation to pre-97 members, but he said the step marks “real progress”.
“I, of course, recognise this does not go as far as some affected members would have wanted. But this change is real progress and rightly balances the interests for eligible members, levy payers, taxpayers, and PPF’s ability to manage future risk.”
The PPF will meet these additional costs from its existing reserves.
Sara Protheroe, PPF chief customer officer, said: “This positive move would make a meaningful difference to thousands of members’ lives. While implementing this change will be no small task, we’re fully committed to delivering this at the earliest opportunity if and when it becomes law.”
