In July 2024, the chancellor confirmed that the government would approve pay uplifts averaging 5.5 per cent for public sector workers.[1] This is more than double the rate of inflation, which was 2.3 per cent from April 2023 to April 2024,[2] and follows previous pay awards of five to seven per cent in 2023 and five per cent in 2022.[3] While real earnings decreased across both the public and private sector in 2023 due to high inflation, pay in the former was still eight per cent higher compared to the latter.[4]
In addition to higher pay, public sector workers also receive more generous pensions. The TaxPayers’ Alliance (TPA) produced research in August 2024 examining pensions inequality between the public and private sector.[5] It found that employer pension contributions in the public sector were more than six times larger than in the private sector (27 per cent compared to 4.18 per cent). This meant that total remuneration for public sector employees was £8,093 more than for a private sector employee on the same wage. In this context, there have been calls to balance pay increases with less generous employer pension contributions.[6]
This briefing note examines the growth of public sector employer pension contributions from 2009 to 2024 and demonstrates that they are not only higher than in the private sector but have also grown considerably in the past 15 years.
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Key findings
- Employer pension contributions in the public sector rose by an average of 11.33 percentage points across three major public sector pension schemes, between 2009 and 2024.
- From 2009 to 2024, public sector employer pension contributions rose:
- from 18.9 to 28.7 per cent in the civil service pension scheme,
- from 14 to 23.7 per cent in the NHS pension scheme,
- from 14.1 to 28.6 per cent in the teachers’ pension scheme,
- and from 15.67 to 27 per cent on average.[7]
- This represents a £5,687 or 156 per cent cash terms increase in employer pension contributions from 2009 to 2024, when accounting for the growth of average public sector earnings.
- This was more than three times the growth of public sector wages from 2009 to 2024, which rose by 48 per cent during that period.
- Including both wages and employer pension contributions, total remuneration rose by 63 per cent for public sector workers between 2009 and 2024, 8.8 percentage points higher than inflation which was 54.2 per cent in that same period.[8]
- A 5.5 per cent increase in public sector pay from April 2024 levels would mean an additional £514 in employer pension contributions on top of a £1,902 increase in pay.
- In cash terms, the increase in employer pension contributions between 2009 and 2024 is almost three times more than the proposed 5.5 per cent increase in public sector pay, £5,687 compared to £1,902.
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[1] HM Treasury, Chancellor: I will take the difficult decisions to restore economic stability, 29 July 2024, www.gov.uk/government/news/chancellor-i-will-take-the-difficult-decisions-to-restore-economic-stability, (accessed 12 August 2024).
[2] Office for National Statistics, Consumer price inflation tables, 17 July 2024, www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation, (accessed 12 August 2024).
[3] Brione, P. & Francis-Devine, B., Public sector pay, House of Commons Library 15 January 2024, p.4.
[4] Ibid. p.17.
[5] Friend, D., Pensions inequality, TaxPayers’ Alliance, 6 August 2024, www.taxpayersalliance.com/pensions_inequality_2024, (accessed 9 August 2024).
[6] Worlidge, J. et al., 20 ways to improve the civil service, Institute for Government, July 2024, p.6.
[7] Average of the employer contribution rate for the civil service, NHS and teachers’ pension schemes.
[8] Office for National Statistics, Consumer price inflation tables, 17 July 2024, www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation, (accessed 9 August 2024).