Workplace Pensions: Index Linking
The question
To ask the Secretary of State for Work and Pensions, what steps her Department is taking to help support pensioners in North Shropshire constituency whose pre-1997 contributions are not subject to indexation.
Answered by Torsten Bell
Most schemes do pay some pre-1997 indexation, because of scheme rules or as a discretionary benefit. Analysis published last year by the Pensions Regulator shows that as of March 2023, only 17 per cent of members of private sector defined benefit pension schemes do not receive any pre-1997 indexation on benefits. This information can be found at: https://www.thepensionsregulator.gov.uk/en/document-library/research-and-analysis/data-requests#f3a5fe60511a445f91112bd7dd8a64ae
But for those affected by a lack of indexation I recognise the significance this can have.
Members of these pension schemes are now understandably concerned at seeing inflation erode the value of their retirement income.
It would be unreasonable to retrospectively increase the cost to schemes for benefits already earned, as these costs could not have been taken into account in the funding assumptions used to set contribution rates at the time.
The Government’s upcoming pension reforms on the use of surpluses in defined benefit schemes will make it easier for individual schemes to make decisions that improve outcomes for both sponsoring employers and members, which could include discretionary benefit increases.
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