Pre-1997 Pensions: Discretionary Increases

Matt Rodda Excerpts

Thursday 19th March 2026 Commons Chamber

[Luke Akehurst]

I absolutely share that concern. My understanding from the constituent I met is that Nissan’s trustees include a majority of company appointees who outvote the trustees representing the members of the scheme. Key factors have been ignored, from ignoring inflation to overlooking member contributions. For that reason, I believe that statutory intervention is urgently required.

[Matt Rodda (Reading Central) (Lab)]

My hon. Friend is making an excellent speech, and I congratulate him on securing today’s debate. Has he noticed in his work on this issue that in some cases, some international companies are paying inflationary increases in other jurisdictions where they operate, but not in the UK? There have been a number of instances of that in my area, where pensioners from Berkshire in schemes run by international companies have seen exactly that. For example, Irish pensioners or US pensioners get an increase, but not British pensioners.

[Luke Akehurst]

I thank my hon. Friend for that very useful contribution. I was not aware of that, and I am shocked. It is a further injustice if pensioners in the UK are treated differently from pensioners who worked for the same company in other territories. While the Pensions Ombudsman can establish whether procedure has been followed, only politicians can decide whether outcomes are fair. Will the Minister set out what scope he sees for his role in ensuring fairness over defined benefit pension schemes?

There is another injustice in the way that the Nissan scheme treats its pension holders. Members across the House will be aware that most people take up the option to take a quarter of their pension as a tax-free lump sum. That money is vital to kick-starting retirement, allowing people to pay off their mortgages and other major debts or make major purchases when they first become pensioners. However, the split between pre-1997 and post-1997 pensions means that this scheme, which should be hugely beneficial for those retiring, can be and is being used against them.

The Nissan pension scheme has been paying out its lump sums from those parts of people’s pension funds where the payments would have increased with inflation and leaving in their pension pot the pre-1997 part where the benefits will not track inflation. The impact of that means that, once a lump sum has been taken, the parts of the pension that are left will receive lower or no annual increases. That is clearly unjust.

Worst of all, this change was not even directly communicated with pension holders. My constituents knew about what is frankly an accounting trick only as they noticed their pension increasing by less than anticipated over the years. Because of that, I hope the Minister is able to set out what the Government’s position is on which part of these kinds of pensions should be paid out as a lump sum. Will he work to protect pensioners from quirks of sum calculation being used to deny them the increases that they need to keep up with the change in the cost of living?

I want to recognise that Nissan is otherwise an excellent employer and a hugely important contributor to our regional economy in the north-east and, indeed, to the British manufacturing industry as a whole. I am sure that my hon. Friend and neighbour the Member for Blaydon and Consett (Liz Twist), who also has many constituents working there, agrees. Not only has Nissan employed people, it has provided jobs deep into the supply chain. Given its status in the region as a very much admired employer, it is a real shame that it seems to be forgetting that its success, bringing employment and regeneration to the north-east over the past 40 years, comes from its loyal workforce. These cost-saving exercises on the pension scheme are no way to treat employees who have worked so hard and deserve a decent retirement.

Crucially, discretion over what increases pension holders receive currently lies with the trustees. However, the most common long-term target for a pension scheme is buying out with an insurer, an outcome that takes decisions of that nature out of the hands of trustees. When a scheme is bought out, trustee discretion disappears entirely, meaning that without legislative reform, thousands of pensioners will lose even the faint hope that the trustees might give them an increase. Given that the Government have made clear their desire to put more power into the hands of trustees of pension schemes, I would appreciate if the Minister could set out whether the Government have made any assessment of that risk, and whether they intend to take any action to benefit those pension holders affected by insurer buy-out.

To illustrate the financial impact of this injustice, I will tell the House about a constituent of mine. Steve, who I have met, started working for Nissan in 1985, meaning that a considerable amount of his pension contributions were made before the 1997 cut-off. He retired in January 2016. Since his retirement, consumer price index inflation has totalled 40.3%, while Steve’s pension has increased by only 8.3%, the minimum legally required for his post-1997 contributions. In real terms, Steve’s pension has decreased by a staggering 32.5% in just nine years. Meanwhile, the state pension has increased by 48% since 2016, when Steve retired. We are right to be proud of the increases to the state pension we have delivered, including £575 this year for the new state pension. If we believe in the importance of protecting state pensioners—a belief we have backed up with real money out of the door—why should we not apply the same standard to defined benefit pension schemes?

Steve is just one example of someone being short-changed by this anomaly. My hon. Friends the Members for Hartlepool (Mr Brash), for Blyth and Ashington (Ian Lavery), for Blaydon and Consett, for City of Durham (Mary Kelly Foy), for Newcastle upon Tyne East and Wallsend (Mary Glindon), for South Shields (Emma Lewell), for Easington (Grahame Morris) and for Jarrow and Gateshead East (Kate Osborne), along with others, have all been advocating for constituents involved in the dispute with the Nissan pension scheme. I also pay tribute to my hon. Friend the Member for Washington and Gateshead South (Mrs Hodgson), who has been fighting for the hard-working people at Nissan as the constituency MP for the site. I congratulate her on her very recent and well-deserved promotion to ministerial office, which unfortunately precludes her from participating in the debate.

Nissan is not an isolated case; it is indicative of a much wider problem, where the state is failing to stand up for fairness and the value of a pension is drastically determined by which side of an arbitrary cut-off date contributions were made. Parliament has already been presented with a clear solution to this matter. I commend my hon. Friend the Member for Llanelli (Dame Nia Griffith) on tabling new clause 22 to the Pension Schemes Bill, which would have legislated to address this issue. Disappointingly, the Government indicated opposition to that amendment, and it was not put to a vote. Will the Minister elaborate on why the Government were unwilling to support my hon. Friend’s amendment?

I am aware that Ministers have previously cautioned against retrospective changes to pensions that would go the full way to correcting this injustice. While I do not agree that we should accept an injustice just because it has already happened, I hope the Minister will consider whether a statutory increase to pre-1997 defined benefit pensions could be enacted from this point forward, even if it cannot be retrospectively applied. Earlier this month, I co-ordinated a joint letter with colleagues whose constituents are missing out on money to which we feel they are entitled. That letter calls on Ministers to address the problem I am raising today by supporting my hon. Friend’s new clause 22, or by committing to bring forward similar measures before the Pension Schemes Bill achieves Royal Assent.

The Pension Schemes Bill now sits with the other place, where my predecessor, the now Lord Beamish, will make the case for those adversely affected by this oversight in the law. I urge the Government to accept any forthcoming amendments on this matter, and to commit to working with those of us advocating for a fair resolution for our constituents. I understand that the Bill is completing its final stages, meaning that time for action is running out. Increasing pre-1997 pensions would not only benefit the more than 1 million pensioners in question; it would also mean greater tax receipts for the state, thereby boosting public services and allowing more investment in communities like the one I represent.

The Government have already taken limited but welcome steps to address the injustice for holders of pre-1997 pensions. They have announced legislative changes to allow the pension protection fund and the financial assistance scheme to start paying inflation-linked increases, capped at 2.5%, on pre-1997 pensions—something that had previously been prohibited under the law. Ministers have confirmed that this change will benefit around a quarter of a million PPF members by improving their payments by an average of £400 a year, with the earliest increases expected from January 2027 once the legislation is in place.

The Government have also stated that the reforms in the Pension Schemes Bill, particularly those relating to surplus release, are intended to give trustees more flexibility to address this issue in future. Have the principles that have guided the Government in making those welcome adjustments been applied to the remaining pre-1997 pension holders who have been left behind? I hope that Members will agree that there is no justification for why the constituents I have mentioned today should not receive a pension that keeps up with the rising cost of living.

I know the House is committed to dignity and security in retirement as a key part of the social contract that we seek to uphold. I have even heard anecdotal evidence that pensioners affected by the change have had to return to work after they have retired, or have downsized from their family home to make ends meet. No pensioner should see their dignity and security eroded by an accident of timing. I therefore urge the Government to do more to apply the current values to pre-1997 pensions. I look forward to hearing from my hon. Friend the Minister on this matter.