Public service pension increases
Public service pension payments are required by statute to increase each April, in line with prices.
Public service pension schemes provide pensions for public sector workers, including members of the Civil Service, the armed forces, teachers, police, firefighters, NHS employees and local government workers. There is a statutory requirement to increase the main public service pensions payment each April, in line with prices. The requirement is for the increase to be at the same rate as the additional State Pension, now measured according to the annual increase in the Consumer Prices Index in the year to the preceding September.
In April 2026, public service pensions increased by 3.8%, in line with the annual increase in the Consumer Prices Index up to September 2024 (except for those public service pensions which had been in payment for less than a year, which received a pro-rata increase).
Further information is available in the Commons Library research briefing State Pension uprating.
Switch to Consumer Price IndexUntil April 2011, the measure of prices used for calculating increases to public service pensions was the Retail Prices Index (RPI). However, in the June 2010 Budget, the coalition government announced that it was switching to the Consumer Prices Index (CPI). The government said it was switching to using the CPI as it seemed “a better representation of the way consumers change their consumption patterns in response to price changes.”
The CPI generally increases less quickly than the RPI, which meant that the change to using the CPI was expected to reduce the generosity of public service pensions and the cost of providing them. The change to the CPI was unsuccessfully challenged in the courts by public service trade unions. In July 2021, the government estimated that the switch to the CPI, increases in member contributions and structural reforms in 2014 and 2015 will save over £400 billion over 50 years (PDF).
The RPI is still used by many defined benefit pension schemes in the private sector. Defined benefit pension schemes provide a guaranteed income in retirement. In September 2019, the UK Statistics Authority said it intended to address shortcomings of the RPI by bringing the methodology for calculating the RPI into line with that for the Consumer Prices Index including owner occupiers’ housing costs (CPIH). Following consultation, HM Treasury announced in November 2020 that aligning the RPI calculation methodology with the CPIH calculation methodology would not happen before 2030.
Further information is available in the Commons Library research briefing Occupational pension increases.
Basic and additional State PensionFor people who reached State Pension age before 6 April 2016, the State Pension has two tiers:
- the basic State Pension, which is a contributory flat-rate benefit
- the additional State Pension, which depends on someone’s earnings during their working life since 1978
When the additional State Pension was introduced, it was possible to ‘contract out’ of it. This meant that both the employer and employee paid a reduced rate of National Insurance, and instead of the additional State Pension the employee received a workplace pension meeting certain requirements (a ‘Guaranteed Minimum Pension’; see below).
Contracting out ended when the new single-tier State Pension replaced the basic and additional State Pensions in April 2016, as there was no longer an additional State Pension to contract out from.
Guaranteed Minimum PensionA Guaranteed Minimum Pension (GMP) is a minimum pension normally provided through a workplace pension scheme to people who contracted out of the additional State Pension between 6 April 1978 and 5 April 1997.
Until April 2016, when the State Pension changed and contracting out ended, the main public service pension schemes were contracted out of the additional State Pension.
Special arrangements for public service pensionsFor public service pensions, there were special arrangements to ensure that public servants received increases to (or ‘indexation’ of) their GMP, while preventing double increases.
With the introduction of the new State Pension in April 2016, the additional State Pension (which formed part of the special arrangements) was removed. In November 2016, the government put in place temporary arrangements committing to full indexation of GMPs earned in public service for people who reached State Pension before April 2021, while it looked for a permanent solution. In March 2021, the government said that it would make full indexation the permanent solution.