Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make an estimate of the number of people expected to be affected by the Pensions Increase (Review) Order 2022 (S.I. 2022/333) in the 2023/24 financial year.

Section 59 of the Social Security Pensions Act 1975 (as amended) read with the Pensions (Increase) Act 1971 (as amended) provides for public service pensions to be increased annually by the same percentage as State additional pensions (State Earnings Related Pension and State Second Pension). State additional pensions were increased by 3.1 per cent from April 2022, in line with the increase in the Consumer Prices Index (CPI) in the 12 months from September 2020 to September 2021. From 11 April 2022, most public service pensions in payment were also increased by the same percentage, with pro-rata increases for those in payment for less than a year.

The Pensions Increase (Review) Order 2022 covers “official pensions,” which are those pensions listed in Schedule 2 of the Pensions (Increase) Act 1971. This covers most public service pensions. There are, however, also a small number of other schemes (which are not official pensions) where the benefits are increased by analogy with official pensions under the rules applying to those schemes.

Official pensions are increased as specified within the annual Pension Increase (Review) Orders, and the Order applies to a pension that began before or during the 12 months before the date that the Order commences and where the pension satisfies a condition qualifying for pension increases to be paid. The pensions increase is therefore usually paid to recipients aged 55 and over, or those aged less than 55 who are in receipt of a survivor's pension, or a pension paid on account of ill health.

Pensions increases also apply to pensions in deferment, although the entitlement arises only when the pension comes into payment and the recipient satisfies a qualifying condition. Members currently accruing further pension benefits in schemes covered by these indexation provisions will also be entitled to receive increases under Pension Increase Orders and some who retire in future, particularly in the next few years, might be entitled to increases under the Pensions Increase Order 2022.

Those affected by the Pension Increase (Review) Order 2022 in the 2022/23 financial year are therefore likely to equal:

1. Total public service pensions in payment;
2. Total public service pensions in deferment, most of which would be affected in due course;
3. A proportion of total public service pensions still accruing, where some future pensions in payment and deferment might in due course be affected by the 2022 Order. That proportion cannot be readily assessed as it will depend on many variable and unknown factors, including future decisions by members about careers and retirements.

Table 2 of the last ONS Occupational Pension Schemes Survey, assessing data up to 2019, estimated that there were then 5.3 million public sector pensions in payment; 4.7 million deferred public sector pensions; and 6.6 million active members of public sector pension schemes. However, this data will also include a small proportion of members who, for example, have defined contribution pensions and are not in arrangements necessarily affected by the Pension Increase (Review) Order 2022.

In addition to those noted above, some private sector scheme rules provide that the defined benefit pensions of some or all members will increase in line with increases applying to official pensions.

A further Pensions Increase (Review) Order will be made for the 2023/24 financial year, which would allow for movements in prices since the previous assessment based on September 2021 CPI.