Eroded pre-1997 pensions: MPs take evidence cost and future of non-indexation of defined benefit schemes
The Work and Pensions Committee will take evidence on the impact of non-inflation indexation, particularly affecting some with pre-1997 pension rights, from leading figures from affected retirees’ campaign groups. from Hewlett Packard's, and American Express UK's pension schemes. Many of those affected have seen no pension increase for years despite inflation which rose as high as 12% during the COVID-19 pandemic.
Meeting details
Representatives of the pensions industry and the Pensions Regulator's Fiona Frobisher will also feature in this one-off session ahead of further progress of the Pension Schemes Bill.
In April 1997, defined benefit pension rules changed to ensure that they were indexed – meaning they rose somewhat in line with inflation up to cap. However, some pensioners with defined benefits predating this are in schemes where increases to entitlements are discretionary rather than mandatory, leaving some incomes to erode. Last year, 17% of people in private sector defined benefits schemes had pensions that did not receive any pre-1997 indexation on their payments, according to the regulator.
A wider group of DB pensioners have rights to some indexation but subject to a cap with discretion to make payments above this. For the BP Pensioner Group and others, the question is how to prevent the value of their pensions being eroded over time with schemes in surplus.
MPs on the Committee may also seek to establish the legal basis on which increases have been limited or denied, avenues for and attempts at member engagement with trustees, and whether members can expect a share of scheme surpluses under plans giving trustees the power to change rules to access them.