Increasing pensions in payment

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Increasing pensions in payment
  • Statutory requirement to increase pensions in payment
  • Scope of statutory requirement
  • Schemes to which the statutory requirement does not apply
  • Statutory minimum increase rates
  • Timing of statutory minimum pension increase
  • Change in basis of statutory pension increases from RPI to CPI
  • General
  • Changing the scheme rules to reflect CPI
  • Statutory increases to pension credits
  • More...

Increasing pensions in payment

THIS PRACTICE NOTE APPLIES TO ALL OCCUPATIONAL PENSION SCHEMES

FORTHCOMING DEVELOPMENT: On 25 November 2020 the government and the UK Statistics Authority (UKSA) published their response to their consultation on reforms to the Retail Prices Index (RPI) methodology, following the Spending Review 2020, together with an exchange of letters between the Chancellor, the UKSA Chair, the Governor of the Bank of England, and the Deputy Governor for Monetary Policy of the Bank of England in relation to the consultation outcome.

The consultation response confirms that RPI is to be aligned with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) in order to address its statistical shortcomings. However, the Chancellor of the Exchequer has exercised his power to postpone implementation of this change until February 2030, when the final specific index-linked gilt will mature.

Although the change is still a long way off, the alignment of RPI with CIPH could have a significant impact on the future funding levels of DB pension schemes and on the level of benefits received by DB scheme members. On the one hand, DB scheme members whose benefits are increased by reference to RPI (whether in payment or deferment) are likely to receive lower benefits than they would have done under the previous calculation basis, which would lower overall scheme liabilities. On the

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