FAS (PPF) May Start Offering Inflation Increases on Pensions Prior to 1997

westv

Just got an email today from the FAS to say that there was an announcement about pension inflation increases (capped at 2.5%) for service prior to 1997. I have no idea if I will benefit (all mine was prior to 97) or if it will just be future members when they reach pension age.

Dear Mr ....,

 

I’m writing to let you know about a government announcement which could positively affect some FAS members in the future. What’s happened? The government has announced that it intends to change the law in relation to the inflation increases on pensions built up before 1997 for FAS members. This is often known or referred to as ‘pre-97 indexation’. As you likely know, the current law doesn’t allow us to pay inflation increases on pre-97 pensions. The government has said it will legislate through the Pension Schemes Bill to change this. The government has said it wants to enable us in future to pay pre-97 increases capped at 2.5 per cent for members whose schemes promised them. These would then be paid going forwards. A positive development This is a significant and positive development. We currently estimate that as many as 91,000 FAS members could stand in the future to benefit from this change. I’d also like to pay tribute to the member campaigners who’ve made the case so powerfully for change. We’re pleased your voices have been heard and the government has acted positively. What happens next? It’s important to stress that the law hasn’t yet been changed. There is still a long way for the Bill to go. MPs and Peers will now need to consider this change and agree to it. The Bill is expected to become law sometime next year (2026). When this has happened, we’ll then be in a better position to say when we think we can make this change to uplift affected members’ assistance payments. In the meantime, we’re working hard to get ready to make this change. There’s a lot of work to do, so we’re getting on with it now. We’ll make this change at the first opportunity We’re fully committed to making this change at the earliest feasible opportunity after the Bill becomes law. Currently we must apply increases to members’ payments in January each year. If the Bill becomes law sometime next year as expected, the first opportunity to begin applying any change to pre-97 indexation would then be January 2027. Staying informed on progress Over the coming weeks and months, we’ll post updates and more information on our member websites so you can stay fully informed of developments. When the Bill has become law, we then intend to write out to those FAS members we expect will benefit from this change. You don’t need to do anything – if you will benefit from this change, we’ll contact you when the time is right. Sara Protheroe Chief Customer Officer, Pension Protection Fund

SnowMan

Interesting. It follows on from the budget announcement

https://assets.publishing.service.gov.uk/media/6929b353345e31ab14ecf735/E03444720_Budget_2025_Web_Accessible.pdf

4.21 Defined Benefit pensions – inflation protection for pre-1997 pensions in the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) - The government will help protect members of the PPF and FAS from the impact of inflation by introducing CPI-linked increases, capped at 2.5% a year, on pre-1997 pension accruals where their original schemes provided this benefit, from January 2027. This will help ensure members’ pensions keep pace with the cost of living

I assume it will apply to anyone with benefits in the PPF or FAS provided the scheme guaranteed increases or indexation on pre 6/4/97 pensions. Should apply to pensions currently in payment from January 2027.

Another article about it here

https://www.actuarialpost.co.uk/article/ppf-statement-on-pre-97-indexation-budget-announcement-25981.htm

PensionsStuff

Good news and a good choice, employers/Schemes benefit from reduced/nil levy because of how much money they had always seemed the opposite way to do it, benefits should be increased and the already minor levies should be kept the same / increased.

westv

SnowMan said:

I assume it will apply to anyone with benefits in the PPF or FAS provided the scheme guaranteed increases or indexation on pre 6/4/97 pensions. Should apply to pensions currently in payment from January 2027.

That's good news. I did receive an uplift last year based on a ECJ ruling so this change will benefit me in my later years. 

hyubh

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PensionsStuff

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

hyubh

PensionsStuff said:

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

It is effectively a tax on schemes well supported by their sponsoring employer to provide a backstop to those that were/are not. Do you yourself receive PPF compensation, or are a deferred member...?

PensionsStuff

hyubh said:

PensionsStuff said:

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

It is effectively a tax on schemes well supported by their sponsoring employer to provide a backstop to those that were/are not. Do you yourself receive PPF compensation, or are a deferred member...?

We ignoring the risk based levy (which is the majority of the total levy) by definition is the opposite of what you've just said ?. It punishes those most at risk, those not can reduce this massively.. so im not entirely sure the point you're trying to make.

It is car insurance, in simple terms drive safely for years and it goes down, drive badly and yours goes up, people who drive safely aren't paying more to cover for the other group 

I'm neither , I've just been in plenty of Trustee meetings talking about the levy matching 0.006% off their assets which Trustees pay more each year to sign off their expenses to travel to London for meetings. Schemes have room to cover for members entering the PPF not being as punished as they were through absolutely no fault of their own.

westv

hyubh said:

PensionsStuff said:

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

It is effectively a tax on schemes well supported by their sponsoring employer to provide a backstop to those that were/are not. Do you yourself receive PPF compensation, or are a deferred member...?

Levy or tax, it's still better than the previous situation

hyubh

PensionsStuff said:

hyubh said:

PensionsStuff said:

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

It is effectively a tax on schemes well supported by their sponsoring employer to provide a backstop to those that were/are not. Do you yourself receive PPF compensation, or are a deferred member...?

We ignoring the risk based levy (which is the majority of the total levy) by definition is the opposite of what you've just said ?. It punishes those most at risk, those not can reduce this massively.. so im not entirely sure the point you're trying to make.

All private sector DB schemes have to pay it. How is that not effectively a tax? I was also responding to your claim that the levy should be increased to pay for unfunded discretionary obligations of failed schemes. The fact the levy is not single tier has no bearing on that.

It is car insurance, in simple terms drive safely for years and it goes down, drive badly and yours goes up, people who drive safely aren't paying more to cover for the other group

The PPF did not exist when most schemes subject to the levy began. In fact when the PPF was introduced, the general closure of private sector DB schemes was well under way. The introduction of the levy, in other words, was inherently retrospective.

I'm still interested whether you yourself would be personally set to gain from what you propose, and if not, whether someone close to you would...

hyubh

westv said:

hyubh said:

PensionsStuff said:

hyubh said:

PensionsStuff said:

the already minor levies should be kept the same / increased.

Very droll. 

PPF levy is a incredibly, incredibly, small cost to a pension scheme. As shown by this news, the funding can be used in much better places than shaving 0.0001% off a Schemes liabilities 

It is effectively a tax on schemes well supported by their sponsoring employer to provide a backstop to those that were/are not. Do you yourself receive PPF compensation, or are a deferred member...?

Levy or tax, it's still better than the previous situation

My objection is to the idea that actually existing PPF compensation is not enough, and well funded schemes and their sponsoring employers should be made to pay for 'rectifying' this situation.