The Department for Work and Pensions has made the Occupational Pensions (Revaluation) Order 2025 (SI 2025/1211). The instrument sets the statutory percentages used by salary‑related occupational schemes to revalue deferred benefits under the final salary method, with effect from 1 January 2026.
The Order gives effect to section 84 and Schedule 3 of the Pension Schemes Act 1993 by specifying, for each ‘revaluation period’, the applicable ‘higher’ and (where required) ‘lower’ revaluation percentages. These are the figures schemes apply when uprating preserved defined benefit entitlements between the date a member leaves pensionable service and the scheme’s normal pension age. The approach mirrors previous years’ instruments.
In line with the established pattern, the Explanatory Note confirms the Order provides the percentages relevant for members who reach their scheme’s normal pension age in the following calendar year-here, 2026. It sets out percentages for revaluation periods between 1 January 1986 and 31 December 2025.
The two rates in the Order reflect statutory caps introduced by successive legislation. The ‘higher’ rate aligns with the price inflation measure for the period, subject to a 5% cap per year under paragraph 2(3) of Schedule 3 to the 1993 Act; the ‘lower’ rate aligns to the same measure but subject to a 2.5% cap for periods caught by paragraph 2(3A) (introduced by the Pensions Act 2008). As in prior years, a separate lower rate is not required for revaluation periods beginning before 1 January 2009.
For administrators, the Order provides the legally mandated cumulative percentages to be loaded into administration systems for early‑leaver revaluation and normal‑pension‑age calculations in 2026. Schemes should align preserved‑benefit statements, transfer quotations and retirement packs to the new factors once the Order commences, and confirm any scheme‑specific rules that go beyond the statutory minimum continue to operate as intended. (Policy Wire analysis.)
With CPI running at 3.8% in the 12 months to September 2025-the reference point typically used for these annual instruments-the single‑year figure for the 2025 revaluation period sits below both the 5% and 2.5% caps. In practice, this implies the one‑year percentages for that period will be 3.8% for both the higher and lower rates within the Order’s cumulative table. (Policy Wire analysis.)
Although focused on deferred benefits, these annual percentages also inform Limited Price Indexation maxima that some private‑sector schemes use for pensions in payment (5%‑capped or 2.5%‑capped increases, depending on accrual tranche). Trustees should confirm whether their rules reference the statutory revaluation orders for this purpose and update member communications accordingly.
Geographical coverage mirrors previous years: the Order extends to England, Wales and Scotland, with Northern Ireland customarily making parallel provision via a separate Department for Communities order. Schemes operating across jurisdictions should ensure the correct instrument is applied.
The instrument is made annually by a pre‑determined formula and government records classify the administrative impact as negligible, so no separate impact assessment is published. For most schemes this is a technical update rather than a policy shift, but it has direct consequences for 2026 benefit calculations.
What to watch next: administrators will want to confirm their cumulative factors reconcile to the statutory table before issuing 2026 retirements, and finance teams may wish to refresh provisions and transfer value bases that are sensitive to near‑term revaluation and indexation assumptions. (Policy Wire analysis.)