PSI7.1.1 - Increases of Pensions in Payment:
General
(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
It is clearly desirable that the purchasing power of pensions
in payment should be protected. Discretionary practice recognises
this and allows pensions in payment to:
- be increased up to the maximum approvable
residual pension at the member's actual retirement date, that is,
after reducing the maximum approvable pension (the maximum
approvable might be permanently reduced by a pension debit, see
PSI6.5.93) by the annuity
value (see Part 8 Section 2) of any pension commuted for a lump sum
retirement benefit or the provision of an allocated pension for a
widow, widower or dependant's pension (see PSI7.1.15 and
PSI12.1.2), and
- then be further increased to take account
of rises in the cost of living since retirement but such increases
should not exceed the maximum residual pension at retirement
increased on a year-on-year basis by the greater of 3% or the
increase in the Retail Prices Index in the year in question.
Alternatively, where a pension is below the maximum at retirement,
it may be increased by a greater annual amount provided the
increased pension remains within these limits.
It is not acceptable to pay pension increases for a fixed period
only nor is it acceptable for an employer to provide cost of living
increases on retained benefits from earlier employments.
[PN9.1]
