Public sector pensioners set for better ‘pay rises’ than actual workers

Retired public sector workers are set to receive better pay increases than their working counterparts under current recommendations. Public sector pensions – including those for teachers, NHS workers and civil servants – are legally bound to increase every April in line with the Consumer Prices Index (CPI) inflation figure recorded in the preceding September, a figure confirmed as 3.5 per cent earlier this month. A number of bodies representing public sector workers have made suggestions as to how much their pay should rise next year. Shorts Many are below inflation and mean current workers will receive smaller percentage increases than those who have retired from public sector positions. What pay rises have been suggested for next year? The School Teachers’ Review Body (STRB) – an independent group that makes recommendations on the pay of teachers and leaders in schools in England – has recommended a 3 per cent pay increase for teachers in September 2027, following a 3.5 per cent rise this year. The Department for Education wrote in a blog last month: “School teachers will see an increase in their pay of 17 per cent since this Government took power – equating to almost £7,900 over four years – with the average school teacher salary rising to over £52,800 from September 2026 and over £54,400 from September 2027.” Meanwhile, in evidence to the NHS Pay Review Body, the Department of Health and Social Care (DHSC) has suggested a pay rise of 2.4 per cent is affordable for nurses next year. In a submission joint with NHS England it said: “DHSC have developed financial and delivery plans that currently plan for a pay uplift of 2.4 per cent without having to make trade-offs against headline Government health commitments. “Should the independent pay review bodies recommend an award above this level, we would need to consider whether and how this could be made affordable from within existing DHSC budgets.” The Review Body on Doctors’ and Dentists’ Remuneration (DDRB) has also received a Government recommendation of a 2.4 per cent pay rise for senior hospital doctors. Resident doctors – formerly known as junior doctors – have already agreed a pay deal delivering an average 6.6 per cent increase by April 2027, including this year’s 3.5 per cent award, with the 2027–28 pay review award coming on top. In evidence to the Senior Salaries Review Body (SSRB), which makes recommendations on pay for senior civil servants, the Cabinet Office has recommended that the pay bill for senior civil servants increases by no more than 2.3 per cent, citing “the overall affordability position”. What will retired public sector workers get? Meanwhile, retired public sector workers got a 3.8 per cent increase to their annual payments in April, in line with the September 2025 CPI rate. Public sector pensions are often referred to as “gold-plated” because of their perceived generosity. Ex-workers get a guaranteed income annually for life, with the amount determined by their salaries when working and their years of service, but are increased inline with CPI every year. It means when public sector workers get below-inflation pay offers, staff end up getting smaller pay increases than their retired counterparts. How much extra did public sector workers get this year? Teachers and senior doctors received 3.5 per cent pay increases this year, while nurses received 3.3 per cent. For civil servants below senior grades, the Government set a maximum 3.5 per cent overall paybill increase limit. Senior civil servants received a 2.5 per cent base pay increase, alongside a 1 per cent pot for performance-related pay progression and a separate bonus pot equivalent to 3.3 per cent of the overall senior civil service pay bill. What do experts think of the suggested pay rises? The public sector pay offers have been slammed by unions, with Professor Nicola Ranger, Royal College of Nursing general secretary and chief executive, saying: “A proposed pay award of 2.4 per cent is on course to be below inflation and would be a betrayal of nursing staff in our NHS.” The British Medical Association (BMA) said the offer for doctors was a “significant real-terms pay cut by all current measures ​of inflation”. Lauren Crowley, assistant general secretary of the FDA union for civil servants, said the 2.3 per cent recommendation was “disappointing”. Experts said it was difficult to change the system, but did highlight issues in public sector pay. Tom McPhail, a pensions expert and former head of retirement analysis at Hargreaves Lansdown, said: “This situation does highlight two glaring disparities in pension provision. There’s the growing divide between public and private sector pension provision, which is largely now of the non-guaranteed defined contribution variety. “There’s also the reality for some public sector workers that their pension is better than their take-home pay; some of them might prefer slightly more pay now and slightly less pension later. “If you have a guaranteed defined benefit pension, then you also need to have an established mechanism for annual increases to the pensions and this can occasionally cause anomalies relative to ongoing pay settlements.” Julian Jessop, an independent economist, explained: “Civil service pensions are relatively generous, but this is partly to compensate for the fact that many jobs pay less than comparable roles in the private sector. It would also be unfair to change the terms of pensions retrospectively. “In contrast, nobody in either the public or private sector should be guaranteed a pay rise in line with inflation, unless this is justified by increased productivity, or necessary for recruitment and retention.” How is public sector pay decided? Some of the pay offers and recommendations to public sector workers could end up being below what is eventually agreed. Public sector pay is informed by recommendations from independent bodies. These recommendations are sent to government and ministers have final say on them. Some of these recommendations have already been accepted – the 3 per cent rise for teachers next September for example – but others have not. Even if the government accepts recommendations, unions can subsequently reject an offer, and there can be pay negotiations and strikes, possibly followed by offer adjustments. Senior doctors in England are already set to stage a two-day strike next month in a dispute over pay and working conditions.