An annual increment is usually given in addition to cost-of-living rise. The increment is nothing to do with cost of living, but is your reward for longevity and possibly for performing a little better than when you were new.
In this case you still get your increment, but with sector pay you could end up with less than a cost-of-living rise if you don't fly much. And your employer's pension contribution is stuck on last year's pay scale.
Catch 23,
You are not dual-based until there is a CAA-approved FTL scheme in place! And even then there are contractual matters to consider.