Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what assessment she has made of the need to clarify trustee fiduciary duties regarding inflation protection.

I understand the concerns that have been raised over the issue of inflation protection for defined benefit pensions (indexation). Discretionary indexation is over and above statutory and scheme requirements. Trustees can already award discretionary increases where scheme rules allow. Decisions on discretionary benefits are usually exercised by the trustees with the agreement of the sponsoring employer.

The Pension Schemes Bill 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 interests of scheme beneficiaries, and can agree with employers how members can benefit from the release of any surplus which may include discretionary indexation.

The Pensions Regulator (TPR) has expressed that trustees should consider the situation of those members who would benefit from a discretionary increase and whether the scheme has a history of making such awards. TPR will be producing further guidance on surplus sharing once the legislation is in place.