Justice for Pre-1997 Pensions

Across the country, an estimated one million pensioners are losing out on pension increases they ought to be entitled to, simply because the hard shift they put in to pay into their pension happened to occur before 1997. This isn’t good enough. This week, I held an Adjournment debate in Parliament to shed light on the injustice of the lack of statutory increases for pre-1997 defined benefit pension schemes, and to ask what the Government is going to do about it.

Before 6th April 1997, Defined Benefit pension schemes in the UK were not legally required to increase in line with inflation. This oversight left pensioners, who had worked hard for their whole life to pay into a pension guaranteeing security in retirement, at risk of seeing their hard work outstripped by a rising cost of living, reducing their financial position in retirement. The 1995 Pensions Act sought to address this problem, introducing statutory Limited Price Indexation, meaning these pensions were mandated in law to rise as inflation eroded their real value.

However, the change only applied to pensions earned after April 1997. Almost thirty years on, pre-1997 Defined Benefit pensions are subject to the same injustice identified and partially resolved by Government all that time ago. It is up to the trustees of these pre-1997 funds to decide the level of pension increases granted. In many cases, the trustee board is controlled directly by the companies themselves.

According to the Pre-97 Pension Justice campaign group, there are at least 13 companies who have granted no increases to their Defined Benefit pension schemes over the last decade. At the top of the list is Nissan – who have not increased these pensions for 25 years. My predecessor as the MP for North Durham, Kevan Jones (now Lord Beamish), has previously written about accounting tricks used by Nissan, taking advantage of the pre-1997 situation to further push down the value of pensions.

I was made aware of this injustice because it affects a constituent of mine in North Durham: Steve. Steve started working for Nissan in 1985, meaning a considerable amount of his pension contributions came before the 1997 cut-off. He retired in January 2016. Since his retirement, CPI inflation has totalled to 40.3%, while Steve’s pension has increased by just 8.3%, the minimum legally required for his post-1997 contributions. In real terms, Steve’s pension has decreased by a staggering 32.5% in just nine years.

In that time since 2016 when Steve retired, the state pension has increased by 48%. The Labour Government is right to be proud of the increases to the state pension we have delivered, including £575 this year for the new state pension. If we believe in the importance of protecting state pensioners, a belief we have backed up with real money out of the door, then why shouldn’t we apply that same standard to Defined Benefit pension schemes?

Steve is just one example of someone being short-changed by the anomaly, and I know that other MPs have been advocating for constituents of their own involved in the dispute with Nissan. In my debate, MPs from across the political spectrum raised similar cases. Conservative MP Sir Julian Lewis highlighted ExxonMobil pensioners who saw inflation-linked increases abruptly halted in 2023. My Labour colleague, Matt Rodda MP, raised cases where multinational firms pay pension increases to workers abroad but deny them to UK pensioners. We also heard disturbing examples, such as at 3M from Dame Nia Griffith, where trustee boards dominated by company appointees blocked inflationary increases even when all trustees supported them. The debate showed that Nissan is not an isolated case. It is indicative of a much wider problem.

Nissan are otherwise an excellent employer and a hugely important contributor to our regional economy in the North East. Nissan has not only employed people, but it has provided jobs in the supply chain as well. It is a real shame that they seem to be forgetting that their success over the last 40 years comes from a loyal workforce. These cost-saving exercises are no way to treat employees who worked so hard and deserve a decent retirement.

Parliament has already been presented with a clear solution to this matter. I commend Nia Griffith, MP for Llaneli, for introducing amendment NC22 to the Pension Schemes Bill, which would have legislated to address this issue. Amendment NC22 would simply guarantee that pre-1997 pensions rise in line with inflation, as post-1997 pensions already do. Disappointingly, the amendment was not accepted by the Government.

Alongside colleagues, I have written to Ministers calling for them to support NC22, or similar legislation to address this injustice. The Bill is now with the House of Lords, where I hope similar amendments will be tabled. I understand that the Bill is completing its final stages, meaning the Government must act swiftly if it wishes to remedy this problem with this law.

Time is running out to correct this injustice. Most pension schemes are bought out with an insurer in the long-term, meaning trustee discretion is removed entirely. Without legislative reform, thousands of pensioners will lose even the faint hope of an increase to their pension to keep up with inflation.

Securing increases to Defined Benefit Scheme pensions wouldn’t just benefit the over one million pensioners affected. It would also mean greater tax receipts for the state, boosting public services and allowing for more investment in communities like the ones I represent. The only losers here would be the companies who are underpaying retired workers who dedicated their careers to hard work.

Already, the Government has taken limited but welcome steps to address injustice for holders of pre-1997 pensions. It has announced legislative changes to allow the Pension Protection Fund and the Financial Assistance Scheme to start paying inflation linked increases, capped at 2.5%, on pre-1997 pensions, something that had been prohibited under existing law. Ministers have confirmed that this change will benefit around 250,000 PPF members, improving their payments by an average of £400 a year, with the earliest increases expected from January 2027 once legislation is in place.

However, it is time to finish the job and deliver full justice for pre-1997 Defined Benefit pensioners. The importance of dignity and security in retirement are rightly recognised across the political as fundamental rights earned from a lifetime of hard work. If we truly believe in these values, we must correct the injustice of pre-1997 pensions, which sees the living standards of pensioners eroded with every day that passes. In the debate, the Minister recognised the growing importance of this issue, as living costs have risen and many Defined Benefit pension schemes have returned to surplus. However, more work is needed to address the injustices myself and other colleagues drew a spotlight to. Pensioners, such as my constituents who worked for Nissan, earned these increases. Parliament must now finish the job and deliver them.