Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, whether she has made an assessment of the potential merits of introducing a mandatory Code of Ethical Practice for pre-1997 members of pension schemes, that promotes (a) transparency, (b) fairness and (c) accountability in managing discretionary pension increases.

It is important that trustees make transparent and fast decisions about discretionary indexation. Defined Benefit Schemes are regulated by The Pensions Regulator (TPR) which has set out that trustees should consider the situation of those members who would benefit from a discretionary increase and whether the scheme has a history of making such awards.

Most schemes do pay some pre-1997 indexation, because of scheme rules or as a discretionary benefit. Analysis published last year by the Pensions Regulator shows that as of March 2023, only 17 per cent of members of private sector defined benefit pension schemes do not receive any pre-1997 indexation on benefits. This information can be found at: https://www.thepensionsregulator.gov.uk/en/document-library/research-and-analysis/data-requests#f3a5fe60511a445f91112bd7dd8a64ae

The Government’s upcoming pension reforms on the use of surpluses in defined benefit schemes will make it easier for individual schemes to make decisions that improve outcomes for both sponsoring employers and members, which could include discretionary benefit increases.

These changes will be taken forward through the Pension Schemes Bill. TPR will be producing further guidance on surplus sharing once the legislation is in place.