Chancellor, Rachel Reeves, has confirmed plans to index for inflation on pensions accrued before 1997 in the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS).

Speaking during the Budget, Reeves stated: "Having heard representations from my honourable friends, the member for Banbury and the member for Edinburgh South West, I will index for inflation on pensions accrued before 1997 in the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS), so that people whose pension schemes became insolvent through no fault of their own no longer lose out as a result of inflation".

The Budget papers have since provided further information, revealing that 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 per cent a year, on pre-1997 pension accruals where their original schemes provided this benefit, from January 2027. 

The PPF welcomed the changes, suggesting that changing the rules on pre-97 increases could benefit more than a quarter of a million (256,000) PPF and FAS members.

The PPF's estimates suggest that around 165,000 PPF and 91,000 current FAS members have some pre-97 benefits where their former schemes provided mandatory indexation.

Commenting on the news, PPF chair, Kate Jones, said: “We warmly welcome the government’s move to change pre-97 indexation rules for PPF and FAS members. We’ve long known the impact the absence of pre-97 increases has had on affected members.

"It’s been important for us to support positive outcomes for, and balance the interests of, our levy payers and members. We’re pleased that members’ voices have been heard, and the government has acted positively.”

Speaking to Pensions Age, however, a spokesperson for the Pensions Action Group, which has campaigned for change in this area, warned that the devil will be in the detail of the policy.

This was echoed by industry experts, as Broadstone head of policy, David Brooks, said that "we will await further details on the true extent of this policy change with questions around just how many schemes will be included".

Broader concerns have also emerged, as Aptia chief actuary, Phil Wadsworth, warned that this measure could put further pressure on trustees of other schemes that similarly aren't protected against inflation.

"Members of large occupational schemes are already lobbying MPs for their benefits to be indexed, and this measure could encourage them to press harder," he stated.

"This is a complex subject and in almost all cases trustees will be cautious about doing so, often because they don’t want to set a precedent or a potentially confusing expectation for members.

"Equally sponsors as well as the government were looking to spend these monies in ways to drive their businesses and the economy. But trustees should prepare for further enquiries by making sure they understand their scheme's position and communicating empathetically with members."

The government previously opposed amendments to the Pensions Schemes Bill, which were intended to address the lack of any pre-April 1997 indexation relating to the FAS and PPF, with Pensions Minister, Torsten Bell, stating that the clauses "would not work" as they would apply to subsets of the PPF population.

However, frustration around pre-97 indexation on PPF and FAS benefits has been growing over the past year, with campaigners stressing the urgency of the situation given the age of those involved, with many of those impacted passing away during the search for a solution.

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