Government delay forces thousands to wait an extra year for their pension increase – are you affected?

THOUSANDS of retirees will be forced to wait a year for key pension increases due to government delays. The Pension Protection Fund (PPF) provides payments to people with defined benefit pensions whose providers have gone bust. Defined benefit is a type of pension that pays a regular guaranteed income based on a worker’s salary and length of service. The PPF also administers the Financial Assistance Scheme (FAS), which covers schemes that closed between January 1, 1997 and April 5, 2005. Sign up for the Money newsletter Thank you! Over 330,000 retirees who rely on the PPF were told their payments would start to rise with inflation as early as January 2027. But 66,000 members have now been told they need to wait until at least 2028 to get the increase as the PPF can’t meet the deadline, according to The Telegraph. Defined benefit pensions that were opened after April 6, 1997 must increase each year with inflation, but this does not apply to plans opened before that date. As a result, the value of their payments is eaten away by inflation each year. Campaigners have spent years trying to change the rules to make the system fairer and last November former Chancellor Rachel Reeves agreed to increasing pre-1997 pensions by inflation. Around 265,000 pensions will see their payments boosted from January 2027, although the increase is capped at 2.5%. Most read in Money Meanwhile, another 66,000 of the affected group will only get the boost on a small proportion of their pension, called the Guaranteed Minimum Pension. This is a sum they get for building up a pot with their employer due to being “contracted out” of the additional state pension. Contracting out happened when an employer chose to opt out of the additional state pension before April 6, 2016. Its staff paid lower National Insurance contributions or the cash was put into a private or workplace pension, so they’d get lower state pension payments but the money would be built up in other pot instead. Under the rules around contracting out employers had to increase pension payments in line with inflation, up to 3% a year. This was not the case with the PPF or FAS. The rules around this are set to change in January 2028. But in the Budget Rachel Reeves said she’d apply the inflation increases going forward and ruled out backdating them. The Pension Protection Fund was approached for comment. A government spokesperson said: “We are making the biggest change to pension compensation in over 20 years, benefiting over 250,000 Pension Protection Fund and Financial Assistance Scheme members. “The vast majority of eligible members will receive these increases from January 2027, the earliest possible date. “For the small number of members whose entitlement relates only to Guaranteed Minimum Pension increases, the PPF needs to carry out further work, including system changes, fresh calculations and thorough testing to ensure members are identified and paid correctly. “We expect these increases to begin from January 2028.” Comment now