On the 1 April each year, all of the Retirement Income Builder benefits members build up (excluding any built up in the previous 12 months as there’s a natural time lag) are increased in line with official pensions, which broadly go up in line with CPI inflation. This provides a level of inflation protection for member benefits.
At the moment, the annual increase for benefits accrued from 1 October 2011 is capped at 10% (the first 5% matches the increase in official pensions, with half of the excess above 5% matched to a maximum of 10%) - this cap will continue to be applied on each annual increase until and including 1 April 2025.
From 1 April 2026 the cap will reduce to 2.5%* - this means benefits built up from 1 April 2024 will be increased by a maximum of 2.5% each year following. In addition, any benefits you’ve built up from 1 April 2022 to 31 March 2024 will be increased by a maximum of 2.5% each year from 1 April 2026 onwards.
The reduced cap will continue to provide a level of protection against cost of living rises and is above the Bank of England’s target inflation rate of 2%.
Please note: The temporary suspension of the reduction of the cap on benefits built up from 1 April 2022 up to and including 31 March 2024 is subject to the trustee’s consultation with Universities UK on the statutory funding documents.
What does that mean for members?
Right now, this won’t affect the way benefits increase, but from 1 April 2026, when the new cap is implemented for most members*, if official pensions increase by more than 2.5%, the increase to any benefits built up in the Retirement Income Builder from 1 April 2022 will be capped at 2.5%. Benefits built up prior to 1 April 2022 won’t be affected by the change.
*It’s important to know that if members retire or leave part way through the year of 1 April 2024 to 31 March 2025, the benefits built up during that year will be increased on 1 April 2025 and will be subject to the 2.5% increase cap, not the 10% cap.