The Pension Protection Fund (PPF) has set out more details on how it intends to begin paying inflation-linked increases to members of the Financial Assistance Scheme (FAS).
In the Budget yesterday, chancellor Rachel Reeves said she intended to enact a law change that would enable the payment of inflation increases for pensions accrued before April 1997.
Increases will be capped at 2.5%, and will only apply to people whose original schemes provided for mandatory indexation on pre-97 pensions, the PPF explained in a press statement.
This will “broadly align pre-97 indexation rules with those already in place for post-97 pensions for PPF and FAS members”, the defined benefit lifeboat fund stated.
“While risks do remain, we’re confident we can absorb this change without compromising the high security we provide for members’ benefits or impacting our plans to set a zero PPF levy next year.”
Michelle Ostermann, PPF
The organisation estimates that the change could benefit approximately 256,000 people, with 165,000 PPF members and 91,000 FAS members believed to have some pre-97 benefits that previously were linked to inflation.
Michelle Ostermann, the PPF’s chief executive officer, said: “This is the right time to make this change to enhance the inflation protection for our members. Twenty years on from the creation of the PPF, we’ve matured and now stand in a strong financial position.
“While risks do remain, we’re confident we can absorb this change without compromising the high security we provide for members’ benefits or impacting our plans to set a zero PPF levy next year.”
Chief customer officer Sara Protheroe added: “I’d personally like to pay tribute to the member campaigners who’ve long advocated so powerfully for change. 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.”
Several amendments have been tabled to the Pension Schemes Bill that aim to address the indexation issue. These will be considered when the bill returns to parliament on 3 December.
The PPF said the first opportunity to pay increases would likely be January 2027, once the Pension Schemes Bill becomes law.
“The final shape of any legislative change, as well as when the bill becomes law, will influence the timescales for implementation,” the PPF said.
