Civil Service Pensions

This web page contains general information about civil service pensions.

Please note that I cannot answer questions about individual pension entitlements, nor do I know where records of previous employment may be found.   But please see the possible sources of advice listed in Note 4 below.

Key Facts

Civil service pensions were once thought to be very generous, but the civil service pension scheme is now broadly similar to the better private sector schemes.  As a result, those few civil servants who earn generous salaries do retire with equally generous pensions.  But the vast majority of civil servants are not particularly well paid and they retire with pensions that are also far from generous. 

One particularly generous element - for a minority of staff, and usually the more senior staff - was that pensions used to be calculated by reference to final salary.  So those who who had been promoted several times, particularly late in their career, gained substantial benefits from this rule.  But the old final salary pension scheme was closed to new entrants from July 2007. From that date, new entrants joined a career average scheme - see below for an explanation of what this means. The Government has also moved pre-July 2007 members to a new career average scheme from 2012 - but for future accruals only, and only for those more than 10 years from Normal Retirement Age.

Another generous element was the annual uprating by reference to the Retail Prices Index (RPI).  But incoming Chancellor George Osborne announced in June 2010 that civil service pensions would in future increase each year in line with the Consumer Prices Index (CPI) not RPI) This immediately reduced the value of all scheme benefits - including those benefits already accrued from past contributions - by around 15%. (A comparison of historic RPI and CPI shows that if this rule had applied in the past then the pension of someone who had retired in 1988 would by 2010 have been 15% lower than it was. See notes 2 and 3 for further information about the differences between CPI and RPI.)

A third apparently generous element was that civil servants did not appear to contribute to the cost of their pensions. But this was in fact much less generous than it seemed as salaries were then set at lower levels, as though pension contributions had indeed been deducted.  Chancellor Osborne nevertheless also announced in 2010 that he believed that the cost, to the taxpayer, of public sector pensions needed to be reduced, and the most effective way to make short-term savings was to increase member contributions. The Chancellor announced that the discount rate used to estimate the future return on current pension contributions should be reduced, so requiring higher contributions - 'though partly from employers. The Chancellor said that he chose the rate at which the economy is expected to grow which he took to be 3%. If that was indeed his logic, then 3% seemed pretty optimistic, and he reduced the rate further to 2.8% in the 2016 Budget, although the resultant increase in pension contributions was this time taken only from employers.

On the other hand, the Government announced in November 2013 that all public sector pensions would continue to increase after retirement in line with inflation (as measured by the CPI) for at least the next 25 years. This is not always the case for private sector pensions.

Finally, civil service pensions, like several other UK public sector pensions, are 'pay as you go' (or unfunded).  There is no pension (investment) fund.  Pensions are instead funded by contributions from current employers and employees, topped up as necessary by the Treasury.  This arrangement is often criticised as being in some way unfairly advantaged when compared with funded schemes.  But it probably makes sense, given the size of the scheme, not least because of the administrative and other costs that would be needed to create and manage the fund.

The post-2012 pension scheme accordingly has the following features:

As a result ...

Most civil service pensions are hardly excessive, although some 'high-fliers' who entered before career averaging was introduced in July 2007 do much better than most. The following table (extracted from Hutton's interim report - see Note 3) summarises all public sector pensions in payment in 2009-10.  See also the notes at the end of this web-page for information about the differences between the public sector pensions paid to men and women.

(Mean figures, below, are total pensions divided by number of pensioners. The median is the figure above (and below) which half of pensions may be found. Mean is much higher than median where there is a relatively small number of high paid staff - and hence high pensions - with a long 'tail' of low paid staff, and hence lower pensions. There are around 300 public service pension schemes, but more than 95 per cent of members are in the six largest categories of scheme - local government, NHS, teachers, civil service, armed forces and police.)



There are big problems with both public and private sector pension schemes throughout the developed world, as people live longer and birth rates fall. In the UK, life expectancy at birth is increasing at an amazing one year every four years. It is estimated that the ratio of UK pensioners to workers will therefore increase from 27% in 2004 to 48% in 2050 - unless something changes. The inevitable consequence is that employers and/or their employees now need to set aside a much higher proportion of salaries to meet pension costs, or else employees have to retire much later, or a combination of both. Sharp falls in share prices around the beginning of this century added to the pressure on funded "final salary" schemes and so caused attention to be drawn to the special circumstances of the unfunded civil service pension scheme.

The problem for the Government is that many civil servants regard their pension as a hugely important part of their overall remuneration package. Senior Civil Servants, in particular, are paid substantially less than their private sector counterparts, and get none of their perks, such as company cars and private health insurance. Their pension really does matter to them. So the Government was faced with a large pension cost, and a workforce determined not to have their employment contract re-written.  But it nevertheless imposed the changes summarised above.

Historical Background

Pensions were introduced by employers - in particular in the armed forces and then the civil service - in order to facilitate the retirement of older less efficient workers so as to make way for younger fitter men. The very existence of such schemes then encouraged employers to recruit younger fitter people who would work for many years before drawing their pensions.

The first pensions appeared in the late 1600s in the public sector. Before then, it was the custom for serving naval, Customs officers etc. to sell their office for a lump sum or annuity. The first known civil service pension was awarded in 1684 when a senior Port of London official became too ill to carry on, and his successor was appointed on a salary of £80pa on condition that £40pa of this was paid to his predecessor. And so began the first 50% pension, paid out of the salary of a younger employee.

Significant further developments occurred in the 1760s and 70s when contributions and pensions were extended to junior officers in the armed services etc., and again in the 1847 when the Admiralty decided to face the fact that 200 senior captains were never going to sea again, promoted them to Rear Admiral, and put them on half pay as a form of retirement pension. Shortly afterwards, in the 1850s, Northcote and Trevelyan recommended that "good service pensions" should be extended into "the ordinary Civil branch of the public service" (Northcote Trevelyan Report - see in particular pp 21-22). A Royal Commission reporting shortly after Northcote & Trevelyan then separately recommended that retirement from the civil service should be possible at age 60 and compulsory at age 65.  There were parallel developments in the private sector, as railway, gas and other large companies developed similar schemes to attract and retain better staff.

Men (until relatively recently) tended to earn much better pensions than women, partly because they earned more and partly because the marriage bar and societal norms encouraged them to leave work when they got married and/or had children.  They did not therefore work for the necessary number of years needed to earn a pension.  Until 1972, for instance, both men and women needed to work 10 years to become entitled to a pension.  (Follow this link for further information about women in the civil service.)

A more detailed history of occupational pensions may be found in chapter 12 of Pat Thane's "Old Age in English History".

Those interested in more detail will find it in a 2021 National Audit Office report on public service pensions (summary here) as well as on this web page.


1. Male public service pensioners typically receive more than female pensioners. Hutton noted that the median male public sector pensioner receives just over £8,000 per annum, while the median female pensioner receives just under £4,000 per annum. This gap can be explained in part by a combination of more fragmented female careers (particularly connected to caring responsibilities), differential rates of part-time employment (there are currently more than seven times as many female part-time public service workers as male ones) and historic differences in careers and consequently in pensionable pay. More information about the issues facing women civil servants can be found here.

2. This ONS Consultation Document‌ explains why CPI is generally lower than RPI. This is not (as has often been reported) because one uses geometric averaging and one uses arithmetical averaging. The real reasons are much more complex and include the way in which clothing prices are tracked, and the fact that the RPI (unlike the CPI) includes housing costs but excludes purchases more often made by low and high income households.

This - from John Kay - neatly explains why there is no one 'correct' measure of inflation:

The stock market goes up and down. Suppose its level alternates each year between 50 and 100, with no upward or downward trend. What is the capital return on the market? Common sense suggests the answer is zero. But is that common sense right? In the good years you obtain a return of 100 per cent. In the bad, the yield is minus 50 per cent. The average return is therefore 25 per cent. There is logic to that. If you invested the same amount every year, and sold at the end of a year, you would indeed make - on average - a very attractive return of 25 per cent a year. What if you bought and sold at random? In that case, four options are equally likely: buy and sell at 50, buy and sell at 100, buy at 50 and sell at 100, buy at 100 and sell at 50. The overall annual expected gain is 12.5 per cent.

If you are by now thoroughly confused, you are not alone. The average historic return on the volatile equity market is central to calculations of the cost of capital and provision for future pension liabilities. But the figure has been debated for decades. The dispute is less about the underlying data than about the way you make the calculation. The question is often framed as the choice between arithmetic and geometric means. But there is no right or wrong answer. In all problems of this kind, the relevant measure is specific to the particular purpose you have in mind.

In practice, of course, government continues to use RPI when it suits it - for increasing excise duties for instance.

It remains to be seen whether CPIH will in time replace CPI. It is, from early 2017, ONS' preferred measure of general inflation.

3. The 2011 Hutton Report provides a good summary of the issues surrounding public sector pensions.

4. Those looking for more detailed information, including about their own pensions, should try one or more of these options:

5. This is a complex subject and I would be glad to be corrected if I have misunderstood or over-simplified anything. But please note that I cannot answer questions about the civil service pension scheme or individual pension entitlements, nor can I help trace pensions. You should instead use the resources listed in Note 4 above.

6.  The Royal Institute of Public Administration published a report on public sector pensions in the 1960s.

Martin Stanley

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