Understanding the Pensions Increase (Review) Order 2025: What It Means for Your Pension

The UK government is set to implement a 1.7% increase in pensions for the 2025/2026 tax year, as outlined in the Pensions Increase (Review) Order 2025. This order ensures that pensions in payment, as well as preserved pensions and lump sums for former public service workers, keep pace with rising prices.

Why the Increase?

The increase is driven by the need to maintain the purchasing power of pensions against inflation. With the Consumer Prices Index (CPI) showing a 1.7% rise in the year to September 2024, this order will help ensure that pensioners do not lose out as living costs rise.

Who Benefits?

The increase applies to all official pensions across the UK, with pro-rata adjustments for pensions that have been in payment for less than a year. This means if you started receiving your pension partway through the year, your increase will be adjusted accordingly.

Legislative Background

The Pensions (Increase) Act 1971 and the Social Security Pensions Act 1975 provide the framework for these annual adjustments. The Secretary of State for Work and Pensions sets the percentage increase, which matches the CPI rise.

No Policy Change

It's important to note that this order doesn't introduce new policies; it simply continues the annual adjustment practice. The government has not conducted a public consultation for this adjustment, as it's a standard procedure based on existing legislation.

Impact Assessment

The order is not expected to impact businesses, charities, or voluntary bodies significantly. However, it will increase pension payments for public service pensioners, with costs already factored into government budget forecasts.

Monitoring and Adjustments

This is an annual adjustment, and the government will address any arising issues as needed. There is no statutory review clause included in the order.

Compatibility with Human Rights

The order has been deemed compatible with human rights legislation, ensuring that it aligns with established legal standards.

For those interested in the detailed workings and legal framework of these adjustments, further guidance is available on the HM Treasury and GOV.UK websites.