Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, whether her Department plans to ensure that pension scheme trustees are able to use surplus funds to provide discretionary increases for pre-1997 pensioners whose pensions have not kept pace with inflation.

Discretionary indexation is over and above the statutory requirements. This discretion is usually exercised by the trustees with the agreement of the sponsoring employer.

The precise design of pension benefits is a matter for employers and trustees and is not covered in Department for Work and Pensions legislation. Pension scheme rules regarding pension entitlements are many and varied and must remain a matter for employers and scheme trustees to decide.

The Pension Schemes Bill 2025 makes changes so that more trustees of well-funded schemes have the flexibility to share their scheme surplus with employers, subject to strict funding safeguards for members.

Scheme trustees are required to act in the interest of scheme beneficiaries. Working with sponsoring employers, they will be responsible for decisions around surplus release. Together they will agree how members can benefit from any release of surplus, which could include discretionary benefit increases.

The Pensions Regulator already expects that trustees should be aware of members who would benefit from any decision to award a discretionary increase and whether the scheme has a history of making such awards.