HM Treasury  

Public sector scheme pensioners get 3% rise

Public sector scheme pensioners get 3% rise

Public sector scheme pensioners will get a 3 per cent increase, in line with the consumer price index (CPI) rate of September.

HM Treasury published new tables for increases to pensions in payment and for increases to lump sums, which come into effect from 9 April 2018.

Since 2015, public sector schemes have moved to using career average earnings as opposed to final salary pensions.

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This basically means each year members bank their accrued pension and this is uprated in-line with the previous September's inflation.

According to Hargreaves Lansdown, some pensions increase this cumulative accrued benefit by more than inflation, such as the Teachers' Pension (CPI plus 1.6 per cent), NHS Pension (CPI plus 1.5 per cent), and the Police Pension (CPI plus 1.25 per cent).

So, with inflation of 3 per cent, the increase for pensions being accrued will be 4.6 per cent on the Teachers’ Pension, 4.5 per cent for those in the NHS and 4.25 per cent for the Police Pension Scheme.

In the previous year, the increase for public sector pensioners was 1 per cent.

The September CPI rate is also used for calculating the state pension increases, and for lifetime allowance purposes.

The rate of the state pension for new pensioners will rise in line with inflation by £4.80 from £159.55 to £164.35, also in April.