Limited price indexation meaning

Limited price indexation (LPI) describes how pensions in payment under occupational defined benefit schemes are increased annually by reference to inflation, but subject to a cap. In UK practice it is a widely used shorthand, not a statutory term, for the statutory minimum increases required by section 51 of the Pensions Act 1995 (with parallel provisions in Northern Ireland). Key features: - Applies to post‑6 April 1997 accrual only; no statutory increases are required for pre‑1997 service. - For pension earned between 6 April 1997 and 5 April 2005, the increase is inflation capped at 5% a year (“LPI 5%”). - For pension earned on/after 6 April 2005, the increase is inflation capped at 2.5% a year (“LPI 2.5%”). - The relevant inflation measure is set by legislation and/or scheme rules (commonly CPI in statute since 2011, though some rules hard‑code RPI or another index). - Statutory exclusions include guaranteed minimum pensions (GMPs) and money purchase benefits. Scheme rules can provide more generous increases. Use and significance: LPI underpins pensions in payment increases, drives scheme funding and actuarial assumptions, and is central to benefit design and member communications. Ireland: There is no statutory requirement for indexation of pensions in payment under the...