I understand the Labour Government's current intention for the Pension Schemes Bill is to make it easier for individual schemes with a pre-1997 non-indexed pension to make decisions that improve outcomes. As Helen Whately MP, Shadow Minister for Work and Pensions, said in the debate at the 3rd Reading of the Pensions Bill on 3 December 2025,
‘We (also) welcome the Government’s amendment of the Bill, reflecting our new clause, to index pre-1997 pensions, for which there was significant consensus across the House. That will provide some dignity for pensioners who have seen their pensions eroded over the years, and we hope that the Government continue to work with campaign groups to see that through.’
You can read the full debate transcript here:
Pension Schemes Bill - Hansard - UK Parliament
As many of my constituents are aware, before April 1997, there was no statutory requirement for defined benefit schemes to increase pensions once in payment. As part of the Pensions Act 1995, the Government introduced a requirement for defined benefit pension schemes to provide some measure of inflation protection for benefits accruing between April 1997 and 2005, capped at 5 per cent. Pensions earned after 2005 are increased by the rate of inflation capped at 2.5 per cent. Some schemes, you will know, do provide some increases to pensions accrued before 1997 once in payment on a voluntary basis.
At the time, it was estimated that applying the rules retrospectively which required schemes to pay indexation on pre-1997 accruals would be prohibitively expensive for pensions providers to fund. Therefore, the changes only applied to benefits accrued from April 1997 onwards and were not backdated to cover benefits already earned.
At that point, it was not considered, I understand, reasonable to retrospectively increase the cost to the scheme of benefits already accrued, as these costs were not and could not possibly have been taken into account in the funding assumptions that determined the contribution rates that were paid at the time.
When the Bill was progressing through the House of Commons, my colleagues tabled an amendment (NC24) to the Pension Schemes Bill on this very issue which sought to find a resolution that both protects the value of pre-1997 non-indexed pensions whilst also ensuring the pension schemes impacted continue to be in a strong position going forward by stating that annual increases would only be paid when the schemes are in surplus.
NC22, the amendment I have been asked to support by a number of affected constituents, was debated as part of a group of amendments but not put to a formal vote. This new clause wanted to remove references to 6 April 1997 from section 51 of the Pensions Act 1995 in order to require that annual increases to pension payments in line with CPI and RPI apply to pensionable service both before and after 6 April 1997.
I know many pre 97 pensioners will be pleased by news the law will change to enable a CPI increase capped at 2.5%, albeit starting in two years’ time, for those in the Pension Protection Fund (PPF) and financial assistance scheme members as announced by the Chancellor in the Budget. However, I am aware pre-97 pensioners in private Defined Benefit schemes administered by successful companies are not included and these may continue to refuse to pay indexation or discretionary awards.
While I am aware around 75% of UK defined-benefit schemes already provide pre-1997 indexation, the remaining 25% represents some 734,000 pensioners.
Torsten Bell MP, the current Labour Pensions Minister, said in the debate,
‘there are wider indexation questions for solvent pension schemes.’
'I want to be straightforward with the House that we do not support retrospectively changing scheme rules…given that contribution levels were set on the basis of the scheme rules at the time they applied. As I have said before…wider changes in the Pension Schemes Bill relating to surplus release will put trustees in the lead in a way that will help on this issue.’
He added,
'The changes give those trustees overseeing schemes without pre-’97 indexation greater leverage in discussions with employers on discretionary increases, should those trustees see fit. I would encourage them to do so…'
'I completely appreciate that that is different in form from the compensation indexation that we are providing within the PPF…'
'My view is that our changes on surplus, which put trustees clearly in the driving seat, provide for more ability for trustees to seek to change that balance of power within their relationship. I do not want to prejudge the individual discussions between all trustees and their employers—those will be different in different circumstances—but trustees are in a stronger position given the changes on surplus release that we are introducing through this Bill.'
My colleagues and I will continue to press the Labour Government for a Pension Schemes Bill that truly delivers more choice and security for both past and future pensioners, and oppose measures that put that at risk and fail my constituents.
