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Pension Increases

Scheme pensions are generally increased each year on 1 April by reference to the annual increase in the RPI over the 12 months to the preceding January. Increases in respect of service between 1 April 2006 and 31 March 2012 are subject to a cap of 4% per annum. Increases in respect of service on or after 1 April 2012 are subject to a cap of 3% per annum.

Additionally, increases in respect of service before 1 April 2006, for members of the former Acquisition Section, are subject to a cap of 5% per annum.

Over the last 5 years, Scheme pensions have been increased by reference to RPI as follows:

Year	2012	2011	2010	2009	2008
Increase	3.9%	5.1%	3.7%	0.1%	4.1%

In common with most similar schemes, British Steel Pension Scheme (BSPS) is contracted-out of the State Second Pension - S2P (formerly the State Earnings Related Pension Scheme - SERPS). If you were an employee Member of the BSPS between 6 April 1978 and 5 April 1997 a part of your Scheme pension is a Guaranteed Minimum Pension (GMP). GMP broadly mirrors the pension you would have received from the State had the BSPS not been contracted-out.

For those over State Pension Age (with some exceptions), the pension is split into different elements, so that the annual pension increase can be accurately calculated. The table below explains how this is done:

Pension	Increase
GMP earned from 6 April 1978 to 5 April 1988	Increase paid by Department for Work and Pensions* (DWP)
GMP earned from 6 April 1988 to 5 April 1997	Scheme pays in line with the increase in the Consumer Prices Index up to 3%*
Excess amount of Member’s Scheme pension over total GMP	Increased by reference to the rise in the Retail Prices Index from January to January subject to the Rules of the Scheme

* Increases to GMP are set by means of Statutory Order. As the table shows, the DWP is responsible for increasing GMP accrued in the Scheme for the period from 6 April 1978 to 5 April 1988. In addition, if the increase granted in the Statutory Order is higher than 3%, the DWP pays the balance of the increase to the GMP earned from 6 April 1988 to 5 April 1997. The relationship between increases which the Scheme makes to your GMP and increases which the DWP make to your State pension is complicated and may differ from this position depending on your circumstances.

Note: The GMP does not come into payment until State Pension Age. Pensions in payment before that time are increased each year in full in line with the Rules of the Scheme. In other words, the full pension payment is increased by reference to the rise in the Retail Prices Index from January to January in line with the Rules of the Scheme.

Any increases made to your GMP by the DWP are added to your State Retirement Pension. Any enquiries about these increases can be made to the DWP by telephoning 0845 9150150.

Examples of how the annual pension increase is applied:

For illustrative purposes, the following examples show how a BSPS pension of £9,000 would have been increased by the Scheme at 1 April 2011 (this being the most recent year where the 4% cap applied) for a member of the former Main Section depending on whether they have reached State Pension Age.

Example 1, where the Pensioner has not reached State Pension Age:

Element	Pension at 31 March 2011	% increase at 1 April 2011	Increased pension
Scheme Pension	£ per annum		£ per annum
Service before 1 April 2006 (including any GMP element)	8,000.00	5.1%	8,408.00
Service from 1 April 2006	1,000.00	4% (capped)	1,040.00
Total pension	9,000.00		9,448.00

Example 2, where the Pensioner has reached State Pension Age:

Element	Pension at 31 March 2011	% increase at 1 April 2011	Increased pension
Scheme Pension	£ per annum		£ per annum
Service before 1 April 2006 (including any GMP element)	7,000.00	5.1%	7,357.00
Service from 1 April 2006	1,000.00	4% (capped)	1,040.00
GMP earned from 6 April 1978 to 5 April 1988	400.00	Nil	400.00
GMP earned from 6 April 1988 to 5 April 1997	600.00	3%	618.00
Total pension	9,000.00		9,415.00