Civil service pensions - reforms to 2010

The Principal Civil Service Pension Scheme (PCSPS) introduced in 1972 (now known as the classic scheme) is a final salary scheme, with an accrual rate of 1/80th of pensionable pay for each year of service (plus a lump sum of three times the annual pension) and a normal pension age of 60. In 2000, the Cabinet Office proposed reforms to the scheme, arguing that pension arrangements should offer the “best possible value to employers and staff relative to cost”.

From October 2002, the premium scheme was introduced for new entrants. It has an accrual rate of 1/60th (with the option to take part as a tax-free lump sum). Members pay a higher rate of contributions than those in classic but the scheme offers improved survivors benefits, for unmarried partners, for example.

Further reforms followed and in July 2007, a new scheme – nuvos – was introduced for new entrants. This provides benefits based on career average rather than final salary and has a normal pension age of 65. Pension provision for existing staff continued broadly on the existing terms, with some new features. An agreement was reached to share future cost pressures (due, for example, to increasing longevity) on a 50:50 basis between employers and staff, subject to a cap on employer contributions.

This note looks at the development of the scheme to 2010. The current Government’s reforms are discussed in Library Note SN 6744 Civil service pensions – current reforms.