The Department for Work and Pensions (DWP) is working with The Pensions Regulator (TPR) to gather information on the number of schemes providing discretionary increases on pre-1997 benefits, Secretary of State for Work and Pensions, Liz Kendall, has confirmed.

The Work and Pensions Committee (WPC) previously wrote to Kendall to request further information on a number of recommendations outlined in the committee's report on defined benefit (DB) pension schemes.

In particular, WPC chair, Debbie Abrahams, asked for a timescale within which the government expects to address issues relating to indexation rules and pre-1997 discretionary increases on pre-1997 benefits, particularly "given the impact of having part of their income frozen, on scheme members who are disproportionately older".

The WPC previously recommended that TPR undertake research on the number of schemes that had discretion in their rules to provide indexation on pre-1997 benefits and how they had used that discretion.

Considering the context of improved scheme funding and questions about the deployment of surpluses, the WPC also encouraged the DWP and TPR to explore ways to ensure that scheme members’ reasonable expectations for benefit enhancement were met, particularly where there was a history of discretionary increases.

In an update to the committee, Kendall confirmed that TPR is obtaining information in relation to discretionary indexation through the 2024 iteration of their annual DB survey, which is sent to a number of occupational pension schemes.

According to Kendall, the regulator is planning to publish the results in spring.

"I recognise the committee’s concern about how the improvements in the funding position of many schemes raises the question about how surpluses will be treated and whether the interests of scheme members are being overlooked, particularly in relation to discretionary increases," she stated.

"I understand the upset felt by some pension scheme members who are no longer receiving the discretionary increases they have been used to receiving."

In addition to this, Kendall confirmed that the Pensions Minister, Torsten Bell, will be writing separately to the committee regarding indexation of pre-1997 rights in the Pension Protection Fund and Financial Assistance Scheme (FAS), with an update expected "shortly".

Kendall also said that the DWP is currently preparing a broader response to the committee’s report on DB pension schemes and intends to share it "as soon as possible", having previously suggested that the committee could expect the report "in the new year".

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