Public sector pension reforms

The NHS and the Teachers' Pension Scheme reforms will be the final reforms of the coalition government following Lord Hutton's Review in 2011. Until now, members of the NHS and Teachers' Pension Schemes have accrued a pension from their 'Normal Pension Age' (NPA).

The reforms will calculate pension benefits as a fraction of career average earnings rather than from their final salary, and the NPA will be increased to match the members State Pension Age (SPA). The changes will have no effect on the pension rights that members have already accrued.

Final salary schemes are more generous to those who see rapid growth in their pay, particularly when the growth occurs towards the twilight of a long career. The reforms will make pension schemes more proportional. The move towards a career average scheme could be detrimental to 'high flyers', highlighting the differences between the public and private sector and pension provision.

The reforms follow Labour's decision to increase the NPA to 65 years old and a previous increase in member contribution rates. However, despite the reductions, on average public sector employees still accrue more generous pensions than those working in the private sector. Figures suggest that 87 per cent of public sector workers are part of an employer provided pension scheme, compared to 49 per cent of those in the private sector. Although automatic enrolment will change those figures in the coming years, it is likely that the private sector contribution schemes will remain less generous.

More information on the changes