Legislation governing public service pensions requires them to be increased annually by the same percentage as additional pensions (State Earnings Related Pension and State Second Pension). Public service pensions will therefore be increased from 10 April 2017 by 1 per cent, in line with the annual increase in the Consumer Prices Index up to September 2016, except for those public service pensions which have been in payment for less than a year, which will receive a pro-rata increase.
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 2016. Public service schemes which rely on a measure of prices, therefore, will use the figure of 1 per cent 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 2016. Public service schemes which rely on a measure of earnings, therefore, will use the figure of 2.6 per cent 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:
Revaluation for active member
This statement has also been made in the House of Lords: