Citation, commencement and extent

1.—(1) This Order may be cited as the Pensions Increase (Review) Order 2025 and comes into force on 7th April 2025.

(2) This Order extends to England and Wales, Scotland and Northern Ireland.

Interpretation

2.—(1) In this Order, “ the Act” means the Social Security Pensions Act 1975.

(2) In this Order, any reference to a pension is a reference to a pension which began before 7th April 2025( 5).

Pension increase: annual rate and lump sums

3.—(1) This article applies to an official pension if—

(a) a qualifying condition is satisfied; or

(b) the pension is—

(i) a derivative pension;

(ii) a substituted pension; or

(iii) a relevant injury pension.

(2) In relation to any period on or after 7th April 2025, the pension authority may increase the annual rate( 6) of the pension—

(a) for a pension which began before 8th April 2024, by 1.7 per cent;

(b) for a pension which began on or after 8th April 2024, by 1.7 per cent multiplied by—

where A is the number of complete months in the period between the beginning date( 7) of the pension and 7th April 2025.

(3) In relation to a lump sum( 8) which is payable on or after 8th April 2024 but before 7th April 2025, the pension authority may increase the lump sum by 1.7 per cent multiplied by—

where A is the number of complete months( 9) in the period between the beginning date of the lump sum (or, if later, 8th April 2024) and the date on which it becomes payable.

Reductions in respect of guaranteed minimum pensions

4.—(1) Where—

(a) a person is entitled to an increase in a guaranteed minimum pension on 7th April 2025; and

(b) entitlement to that guaranteed minimum pension arises from an employment from which (either directly, or indirectly by virtue of the payment of a transfer credit) entitlement to the official pension also arises,

the amount by reference to which any increase is calculated for the purposes of article 3(2) must be reduced by an amount equal to the rate of the guaranteed minimum pension unless the Treasury otherwise direct in accordance with the provision of section 59A of the Act( 10).

(2) Where on the death of a deceased spouse or civil partner a person becomes entitled to a guaranteed minimum pension in relation to a surviving spouse’s pension or a surviving civil partner’s pension, the amount by reference to which any increase is calculated for the purposes of article 3(2) must be reduced in accordance with section 59(5ZA) of the Act.

Explanatory Note

(This note is not part of the Order)

Under section 59 of the Social Security and Pensions Act 1975 (c. 60)(increase of official pensions) where the Secretary of State for Work and Pensions, under section 151(1) of the Social Security Administration Act 1992 (c. 5), directs that the sums in section 150(1)(c) of the 1992 Act are to be increased by a specified percentage, the Treasury must make an order to increase the rates in public service pensions. The Pensions (Increase) Act 1971 (c. 56)defines certain terms, sets out when a pension “begins” and how the increase applies to lump sums.

The increase to be applied is the same as the percentage by which the Secretary of State for Work and Pensions has, by direction under the Social Security Administration Act 1992, increased the additional pension entitlements accruing to employees in respect of earnings for service after 5th April 1978.

For pensions which began before 8th April 2024 the increase is 1.7 per cent. For pensions which began on or after the 8th April 2024 the increases (following the calculation set out in article 3) are as follows—

Article 3(3) of the Order provides for increases on certain deferred lump sums which become payable on or after 8th April 2024 and before 7th April 2025.

Article 4 of the Order sets out reductions to pension increases where a person is entitled to a guaranteed minimum pension deriving from an employment giving rise to the official pension. Where that is the case, the amount by reference to which any increase in the person’s pension is to be calculated is to be reduced by an amount equal to the rate of the guaranteed minimum pension entitlement, unless the Treasury otherwise direct.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.