PRG News Bulletin II – Feb 2024

The UK Government has poured cold water on the Pension Review Group’s campaign for a fair deal on annual cost of living increases on our pensions earned before 1997.

“There are currently no plans to change the legislation relating to pre 1997 indexation,” said Pensions Minister Paul Maynard in a letter sent on his behalf from the Department for Work and Pensions.

The letter was in reply to one sent to Mr Maynard by PRG chair Angela Dean seeking support for our campaign for a new and better CoL agreement for the two UK defined benefit (DB) schemes – the Reuters Pension Fund (RPF) and the Supplementary Pensions Scheme (SPS).

The 13-year agreement with the trustees and the sponsoring company, now the London Stock Exchange (LSEG), to pay maximum annual inflation increases of 2.5% on pensions accrued before April 1997 has now run out.

Elderly Reuters pensioners who earned most or all of their RPF or SPS pensions before 1997 are relying on the trustees of the two funds to negotiate a new deal with the LSEG in the coming months.

No Guarantee

But there is no guarantee, because the old deal was discretionary. The 1995 Pensions Act only made limited indexation obligatory for DB schemes after April 1997.

“Changes to pensions are not normally backdated…………. but only apply to benefits that are built up following the (1995 Pensions Act) change,” said the letter from the Pension Minister’s department.

This was because it was “unreasonable” to add liabilities to pension schemes that would not have been considered in the funding assumptions that determined the pension contributions paid at the time.

If the Government changed the law to require schemes to now pay indexation on pre-1997 accruals, this would be a retrospective change, wrote Naomi Agius on behalf of the Pensions Minister.

The amount of additional liabilities that would be added to schemes could be “very significant,” the letter added. “In some cases, the additional requirement may be a significant burden to the employer, putting its business operations, and ultimately the pension scheme, at risk.”

More Generous Arrangements

There was nothing to stop pension funds making more generous arrangements through their rules, but “whether or not discretionary increases are paid is a matter for the scheme trustees and the sponsoring employer,” the Pensions Ministry letter said.

“The Government has no power to intervene to require a scheme to pay an annual increase above that required by the statutory indexation requirements and/or scheme rules.”

The official letter from the Pensions Minister concluded by saying that fund trustees generally welcomed an insurance company “buy in” or “buy out” of their fund liabilities, which it described as “the gold standard for security for pension benefits.”

You can read the full letter by clicking here

The cool Government response to our campaign for pre-97 indexation follows a decision by PRG members to lobby their individual MPs to seek their support.

Letter to MPs

We have drafted a sample letter for individual RPF/SPS pensioners to send to their MPs and now urge you to get mailing. The sample letter is to be found in the News Section

As the indexation issue gathers steam, the financial media has been highlighting the unfairness of some pension fund sponsoring companies failing to pay any discretionary increases on pre-97 pensions.

There has also been focus on the pay of company bosses, including the chief executive of our sponsoring company. David Schwimmer’s pay package is set to increase to a maximum of £11 million from £6.26 if approved at the LSEG annual meeting this spring, according to various financial media reports.

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