The Pensions Increase (Review) Order 2025
The Pensions Increase (Review) Order 2025, effective April 7, 2025, increases the annual rate of public service pensions.
For pensions starting before April 8, 2024, the increase is 1.7%.
For pensions starting on or after that date, the increase is 1.7% multiplied by a fraction representing the months between the pension's start date and April 7, 2025.
Similar increases apply to lump sums.
The order outlines adjustments for guaranteed minimum pensions, reducing the increase based on their rate of payment.
Arguments For
Intended Benefit: Provides a mechanism to increase public service pensions in line with inflation or other economic indicators, ensuring pensioners maintain a reasonable standard of living.
Evidence Cited: The order is based on powers derived from the Social Security Pensions Act 1975 and the Social Security Administration Act 1992, indicating a legal and historical basis for pension adjustments.
Implementation Methods: The Treasury directs the increases to pension authorities via this order, providing a clear pathway for implementation.
Legal/Historical Basis: The order is rooted in existing legislation, providing continuity and stability to the pension system.
Arguments Against
Potential Impacts: The specific percentage increase might not fully compensate for inflation or cost-of-living changes, leading to a reduction in pensioners' real income.
Implementation Challenges: Administrative complexities might arise in calculating the adjusted pension amounts, particularly for those pensions beginning after April 8, 2024.
Alternative Approaches: More substantial or targeted increases could better address the financial needs of pensioners, depending on the economic context and priorities.
Unintended Effects: The calculation formula for pensions beginning after April 8, 2024 could create inequities among pensioners based on the start date of their pensions.
Citation, commencement and extent1.
(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.
This section provides the order's official title, effective date (April 7, 2025), and geographical scope, covering the entire UK.
Interpretation2.
(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.
This section defines key terms. 'The Act' refers to the Social Security Pensions Act 1975, providing the legal basis for the order, and clarifies that 'pension' in this context only includes those that started before April 7, 2025.
Pension increase: annual rate and lump sums3.
(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 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—
(3) In relation to a lump sum 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—
This section details the pension increase calculations.
Section (1) specifies the types of pensions covered.
Section (2) outlines the 1.7% increase for pensions starting before April 8, 2024, and a pro-rata increase for pensions starting after that date.
Section (3) addresses increases for lump sums payable between April 8, 2024 and April 7, 2025, using a similar pro-rata calculation.
Reductions in respect of guaranteed minimum pensions4.
(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.
(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.
This article addresses adjustments for guaranteed minimum pensions.
If a person receives both a guaranteed minimum pension and an official pension from the same employment, the official pension increase is reduced by the guaranteed minimum pension amount, unless the Treasury decides otherwise. Similar reductions apply to surviving spouse/civil partner pensions.