Pro-rated pension increase

[Silverage]

I have a couple of occupational pensions that started paying out last September on my 60th birthday.

I’ve just received notification from one of them of a 3.8% increase on one of them for the 26/27 year. However they say because I only received my pension for half of the last tax year I’ll only get half of the increase.

I’m trying to get my head around the logic of this. Can anyone help?

[LeoSayer]

It's likely that your pension was index-linked in during the period of deferral until the date of commencement.

In other words, you have probably already had the first half of the last year's inflation increase in the starting amount.

[Somebody]

It's the law.

Your occupational pension's 3.8% increase is prorated because you started receiving payments in September 2025—only ~6 months of the prior tax year (Apr 2025-Apr 2026). UK law requires private sector schemes to give partial increases for first-year pensions.

Legal Basis
Pensions Act 1995 section 51 mandates annual CPI-linked increases (your 3.8% for 2026/27) for private occupational pensions .

Section 54(2) contains the pro-rata rule:

"(2) Where the first such increase is to take effect on a date when the pension has been in payment for a period of less than twelve months, the increase must be of an amount at least equal to one twelfth of the amount of the increase so required (apart from this subsection) for each complete month in that period."

https://www.legislation.gov.uk/ukpga/1995/26/secti...

[Silverage]

Thanks for explaining that. I still don’t really understand the reasoning behind it, but as long as they’ve done it correctly that’s fine.