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Thursday, Jul 24, 2025

Public sector pensions mess could lead to bigger payouts for some

Public sector pensions mess could lead to bigger payouts for some

Former pensions minister Steve Webb examines the potential implications of a court ruling on workers’ payouts, which could leave the new prime minister with a £4bn headache

The pension prospects of more than six million teachers, nurses, civil servants, local government workers and other public servants are in limbo following a court judgment last year and the government’s subsequent response.

Sweeping changes to public sector pensions came into effect in 2015 (or 2014 for local government pensions in England and Wales), and these had a significant impact on the way people’s pension entitlements were calculated. The biggest change was to raise the pension ages in most schemes to match the rising state pension age. The other major change was to pay pensions on the basis of someone’s “career average” earnings rather than their final salary.

Other important changes were made to the rate at which pension benefits were built up for each year of service, and to the way in which those benefits were “revalued” up to retirement age to take account of inflation. Each scheme was changed in different ways in response to individual negotiations between the government and trade unions.



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