Public sector pensions
Public sector pensions

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Public sector pensions
  • Key features
  • Contributions
  • Normal pension age
  • Benefits provided
  • Lump sum on taking benefits
  • Other benefits
  • Reforms
  • Wider pension reforms

Public sector pensions are occupational schemes for employees of central or local government, a nationalised industry or other statutory bodies. They include pension schemes authorised by statute for the:

  1. armed forces (AFPS)

  2. police

  3. firefighters

  4. civil service (CSPS)

  5. teachers

  6. local government (LGPS)

  7. National Health Service

Public sector pension schemes have around 12 million members including approximately 5 million active members. The LGPS in England and Wales is the largest public sector pension scheme.

Key features

Key features of public sector pensions are:

  1. they are described as unfunded—the reality is that there is no pot of money paid in by workers in the past to pay today’s pensioners and the money to pay benefits comes from today’s workers and the employer (effectively the state) on a pay-as-you-go basis

  2. most run at a deficit as there are not enough contributions to pay today’s pension benefits and the Treasury meets the shortfall

  3. the LGPS is different as it has underlying investments


Points to note in relation to public sector pension contributions are:

  1. contributions vary wildly between sectors and depending on the scheme

  2. there are many scheme variations even within one employer—for example, there are five different CSPS schemes open to employees who joined at different times

  3. contribution rates were increased for the financial year 2013/14 with the stated aim of ensuring a fairer