DWP Announces Pension Boost for 256,000 Savers in New Pre-1997 Rule Change

A major shake-up in the pension system is on the way, and it could mean more money in the pockets of over 250,000 UK pensioners. The Department for Work and Pensions (DWP) recently revealed plans to correct an outdated rule that has quietly chipped away at pension values for decades. If you’re part of a defined benefit pension scheme—or know someone who is—this update could be a game-changer.

Background

Let’s rewind to 1997. That’s when the government first introduced a rule saying pensions should rise with inflation each year. Sounds fair, right? The catch: it only applied to pensions built up after April 6, 1997. That left thousands of pensioners with pre-1997 benefits stuck with static payments. As inflation rose year after year, the real value of those pensions slowly eroded.

While some lucky members of defined benefit schemes got discretionary increases—if their provider allowed it—many didn’t. Over time, this created a wide gap in pension incomes between those covered by the new rules and those left behind.

Problem

Here’s the core issue: 17% of members in private defined benefit pension schemes receive zero increases on the part of their pensions earned before 1997. No annual uplift. No inflation protection. Just the same amount, year after year, while the cost of living climbs.

If you’re one of those members, your retirement income may have quietly lost purchasing power over the years, without you realizing it.

Update

Now for the good news. In a recent Budget announcement, the government confirmed that pre-1997 pension benefits within two major schemes—the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS)—will be indexed to inflation going forward. That means payments will rise annually, in line with the Consumer Prices Index (CPI), capped at 2.5%.

The figures? Around 165,000 members of the PPF and 91,000 from the FAS will benefit. That’s a total of 256,000 people who’ll finally see their pre-1997 pension portions grow with inflation.

Here’s a quick summary in table form:

Scheme	Number of Members Benefiting
Pension Protection Fund (PPF)	165,000
Financial Assistance Scheme (FAS)	91,000
Total	256,000

Support

This change isn’t coming out of thin air. It’s part of a bigger plan to fix long-standing gaps in the pension system. Torsten Bell, a minister at the DWP, shared these updates with MPs and laid out how these changes will help not only retirees but also the wider economy.

How? The government wants pension trustees to have more flexibility. If a defined benefit scheme is in surplus—meaning it has more assets than needed—they’ll be allowed to share that surplus with employers. In return, employers could use part of it to offer pensioners discretionary increases, even for pre-1997 benefits.

In plain terms: more freedom for trustees, more leverage for pensioners, and more spending power released into the economy. It’s a triple win.

Impact

This proposal could have ripple effects beyond just those 256,000 people. With around 17% of private pension scheme members currently getting no increases on pre-1997 benefits, this reform opens the door to many more seeing improvements in the future.

Also, with schemes holding a combined surplus of around £160 billion, there’s room to make these changes without putting anyone’s retirement income at risk. It’s about unlocking that dormant cash and using it in smarter ways.

Future

So, what happens next? The proposed changes will need to pass through Parliament as part of the Pension Schemes Bill. Once that’s done, the Pension Regulator will publish new guidance to help trustees understand how to manage surplus sharing and apply discretionary uplifts.

In the meantime, pensioners in the PPF and FAS with qualifying pre-1997 benefits can look forward to their payments increasing in line with inflation—something they’ve been denied for decades.

This is more than just a policy tweak. It’s a long-overdue correction to a rule that left too many behind. For hundreds of thousands of retirees, it’s a step toward a fairer, more secure retirement.

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