Public Service Pension Indexation and Revaluation

Greg Hands Excerpts

Tuesday 2nd February 2016 Written Statements

[The Chief Secretary to the Treasury (Greg Hands)]

Public service pensions in payment and deferment are indexed annually, and the legislation requires them to be increased by the same percentage as additional pensions—state earnings related pension and state second pension. The Consumer prices index up to September 2015 was minus 0.1% and, in the same way that additional pensions will not be increased this year, public service pensions in payment and deferment will also not be increased this year.

Separately, in the new career average public service pension schemes, pensions in accrual are revalued annually in relation to either prices or earnings depending on the terms specified in their scheme regulations. The Public Service Pensions Act 2013 requires HMT to specify a measure of prices and of earnings to be used for revaluation by these schemes.

The prices measure is the consumer prices index up to September 2015. Public service schemes which rely on a measure of prices, therefore, will use the figure of minus 0.1% for the prices element of revaluation.

The earnings measure is the whole economy average weekly earnings—non-seasonally adjusted and including bonuses and arrears—up to September 2015. Public service schemes which rely on a measure of earnings, therefore, will use the figure of 2.0% for the earnings element of revaluation.

Revaluation is one part of the amount of pension that members earn in a year and needs to be considered in conjunction with the amount of in year accrual. Typically, schemes with lower revaluation will have faster accrual and therefore members will earn more pension per year. The following list shows how the main public service schemes will be affected by revaluation: