Increases to pensions in payment
Pension increases in retirement are important as they help your pension keep pace with inflation. Not all pension arrangements include pension increases.
If you are a member of a defined benefit scheme, depending on the rules of your scheme, you may have no increases, fixed rate increases, increases at a rate linked to inflation or salaries, or increases that are discretionary and may be paid if the scheme can afford them.
If you are a member of a defined contribution arrangement and you buy an annuity (pension) at retirement, you will be able to decide whether it remains level or increases during payment. However, the important thing to remember is that adding pension increases has a cost attached and this means that your starting pension income will vary according to the options that you select. You will also be able to choose whether to ensure your pension is guaranteed to be paid for a set period, even if you die during that period. You can usually select a ‘guarantee period’ of up to ten years.