{"id":116332,"date":"2026-01-01T10:20:00","date_gmt":"2026-01-01T10:20:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=116332"},"modified":"2026-01-01T10:16:50","modified_gmt":"2026-01-01T10:16:50","slug":"millions-missed-out-for-decades-pension-rule","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/millions-missed-out-for-decades-pension-rule\/","title":{"rendered":"Millions Missed Out for Decades, But This Pension Rule Is Finally Changing"},"content":{"rendered":"\n

A significant change in pension policy is set to benefit over a quarter of a million people across the UK. The Department for Work and Pensions has announced a major update affecting older defined benefit schemes, correcting what some have described as a long-standing oversight in how inflation has been applied to certain pension entitlements.<\/p>\n\n\n\n

According to the Labour government, approximately 256,000 individuals<\/strong> will receive increased pension payments under the new measures. The change centres on pensions accrued before April 1997<\/strong>, benefits which, until now, were not subject to mandatory inflation protection.<\/p>\n\n\n\n

Pre-1997 Pensions to Be Indexed for Inflation<\/strong><\/h2>\n\n\n\n

According to the Department for Work and Pensions, pensions built up before 6 April 1997 within the Pension Protection Fund (<\/em>PPF<\/em><\/a>)<\/em> and Financial Assistance Scheme (<\/em>FAS<\/em><\/a>)<\/em> will now be linked to the Consumer Prices Index (CPI), capped at 2.5%. These new payments will apply prospectively, meaning they will affect future compensation rather than apply retroactively.<\/p>\n\n\n\n

Torsten Bell,<\/strong> a minister at the DWP, confirmed the change during a government announcement, stating that it would correct an inconsistency <\/strong>stemming from pension rules introduced in 1997. At that time, indexation was mandated for defined benefit pensions, but only for those benefits earned from April of that year onwards.<\/p>\n\n\n\n

The change is expected to impact approximately 165,000<\/strong> members of the PPF and 91,000 <\/strong>current members of the FAS whose original pension schemes had included pre-1997 indexation provisions. According to Bell, \u201ccompensation payments from these schemes on pensions <\/a>built up before 6 April 1997 will be CPI-linked<\/em>,\u201d ensuring fairer outcomes for members affected by inflation over time.<\/p>\n\n\n\n

Figures from the Pensions Regulator<\/em>, as cited by Bell, show that roughly 17%<\/strong> of private sector defined benefit scheme members still do not receive any inflationary uplift for pre-1997 benefits. The reform marks a step towards closing that gap, but only for those whose original schemes had provided for such increases.<\/p>\n\n\n\n

Surplus Sharing and Discretionary Increases on the Horizon<\/strong><\/h2>\n\n\n\n

In parallel with the indexation reform, the government is also progressing with broader changes to how pension surpluses are managed. Through the Pension Schemes Bill<\/strong>, trustees of well-funded defined benefit schemes will gain new powers to share scheme surpluses with employers. In doing so, the government aims to unlock a portion of the estimated \u00a3160<\/strong> billion in total scheme surpluses across the UK.<\/p>\n\n\n\n

Bell noted that such surplus-sharing agreements could also enable trustees to negotiate additional benefits for members, including discretionary indexation for those whose schemes did not originally offer pre-1997 inflation protection.<\/p>\n\n\n\n

The <\/strong>Pensions Regulator<\/em><\/strong> is expected to issue further guidance on how trustees should approach surplus sharing once legislation is finalised. Bell emphasised that trustees are already encouraged to consider whether schemes have a history of awarding discretionary increases and whether members would benefit from such measures.<\/p>\n\n\n\n

The current reform package, while limited to forward-looking payments, signals a broader policy direction that could see more equitable treatment of defined benefit savers in future. According to Bell, \u201cReforms in our Pension Schemes Bill will enable more trustees of well-funded defined benefit pension schemes to share surplus with employers, and deliver better outcomes for members, and benefit the wider economy.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

New government reform will link older pension entitlements to inflation for the first time, boosting payments for defined benefit scheme members<\/p>\n","protected":false},"author":10,"featured_media":116334,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[],"class_list":["post-116332","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retirement","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=116332"}],"version-history":[{"count":1,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116332\/revisions"}],"predecessor-version":[{"id":116333,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116332\/revisions\/116333"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/116334"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=116332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=116332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=116332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}