British Steel Pension Scheme

Pensions Increase Update

The Government announced in July 2010 that it intended to adopt the Consumer Prices Index (CPI) as the measure of price inflation for the purposes of regulating minimum requirements of occupational pensions. CPI is generally lower than the Retail Prices Index (RPI), and this announcement has caused a great deal of concern and uncertainty for many UK pensioners and pensioner groups.

The effect of the announcement on private sector schemes depends on the precise terms of scheme rules and the exact details of any legislative change. The Government has confirmed that it has no intention to legislate for a statutory override to scheme rules which would make it compulsory for schemes to adopt CPI. It has also confirmed that it is not minded to provide assistance to employers and/or trustees who would like to switch to CPI on past service but are hindered by scheme amendment powers and/or statutory restrictions.

References to Index and Indexation in the BSPS Rules are generally defined by reference to RPI. Assuming that the Government proceeds to legislate in accordance with its current proposals, Scheme benefits already accrued will continue to be indexed by RPI.

Once in payment, the post 1988 GMP element is increased in accordance with a Statutory Order, and therefore with effect from April 2011, will be increased by reference to CPI. Separate provisions may also apply in respect of former Schemes which were merged with the BSPS as part of the Long Term Pension Review.