How has the law been changed?
The government has passed a new law, in the Pension Schemes Act 2026, that allows us to pay inflation increases – also known as indexation – on PPF benefits relating to service before 6 April 1997. There are two groups of members who will be eligible for pre-97 increases:
- Members whose scheme rules required the payment of indexation on benefits relating to pre-1997 service (members belonging to these schemes will, in most cases, start getting increases on all of their pre-97 PPF benefits) and;
- Members whose schemes provided pre-1997 indexation only on post-1988 Guaranteed Minimum Pensions (members of these schemes will, in most cases, get increases on a proportion of their pre-97 PPF benefits).
The Act states that indexation will be capped at 2.5 per cent, per year and it will be paid going forward (prospectively).
How will I know if I’m eligible?
We’ve contacted all eligible members to let them know they’re eligible. Members have been contacted by email if possible or otherwise by post.
When can eligible members expect to receive pre-97 indexation?
We must apply increases in January each year – we have no discretion to pay increases out of this cycle.
For the group of members whose schemes provided mandatory inflation increases on pre-97 pension benefits beyond just post-88 GMPs, the date from which the first increases are expected to be payable is 1 January 2027.
For members who were entitled to pre-97 increases on post-88 GMP only, the date from which the first increases are expected to be payable is 1 January 2028 and these increases will apply to a defined proportion of their pre-97 pension. The government hasn't yet confirmed what that proportion will be, however, we expect the proportion that will increase in January 2028 will be double the proportion that will be increased in future years, to make an allowance for the delay.
How do you calculate annual increases?
Every January we apply increases to any increasing compensation or that’s in payment. When we calculate the percentage increase, we look at the Consumer Price Index (CPI), which tracks the rate of inflation. We base the percentage increase on the CPI increase over the twelve months up to the previous May, subject to a maximum of 2.5 per cent, as set out in law. Increases are pro-rata, which means, broadly speaking, if a member has retired part way through the year, the increase applied will reflect the proportion of the year payments were being received.
What happens if I die before you start making these payments?
If you’re eligible for pre-97 indexation, then, in most cases, any eligible beneficiaries you have will also be entitled to increases on their pre-97 PPF compensation.
Will the Board use its discretion to raise the rate of indexation?
The Board has always had a discretion that allows it to alter the rate of the post-97 indexation for PPF members. Because of the new law, our Board will now have a discretion that allows it to alter both the rate of pre-97 and post-97 indexation for PPF members.
The Board reviews its discretion powers annually. It’s important to note that we can’t use the new pre-97 discretion provision to cover the absence of past pre-97 increases. The clear purpose of the power, when it comes into effect, is in relation to future increases.
For increases payable this coming January (2027) the Board of the PPF has decided to leave the levels of indexation set in law unchanged for both pre-97 and post-97 increases. In reaching that decision the Board took into account inflation over the period May 2025 – May 2026, which was 2.8 per cent — close to the 2.5 per cent increase already provided for in law. The Board also considered a range of other factors, including its role as a compensator, which means the Board must consider very carefully any decision that could result in payments exceeding original scheme benefits.
I’m looking to retire soon, how will this affect me?
If you're thinking of retiring soon, please log in to find out more, as the size of your monthly payments and your tax-free lump sum could be affected depending on whether you start your payments before or after the changes take effect.
For the group of eligible members entitled to annual increases on all of their pre-97 compensation, retirement quotes issued for retirement dates on or after 31 December 2026 will include increasing pre-97 benefits. This group of members can also use Quote and Retire on the member website to produce instant alternative quotes for dates before and after 31 December 2026, to see the impact on their compensation.
For the group of members whose schemes only provided mandatory increases on post-1988 Guaranteed Minimum Pensions, who are entitled to pre-97 increases on a proportion of their pre-97 compensation, the new law is expected to come into effect from 31 December 2027. Therefore, we anticipate that from 1 October 2027, quotes issued for this group of eligible members, for retirement dates on or after 31 December 2027, will be based on pre-97 increasing compensation, using new factors.
How can I stay up to date on progress?