UK government funded roles are notable for offering defined benefit pension schemes in an era where defined contribution schemes are the norm in the private sector.

I'm interested in current NHS and Alpha (civil service) pension schemes. I imagine that these are broadly similar to schemes offered to teachers, firemen, etc.

At face value these look like an extremely good deal:

  • The employee pays in a modest amount (e.g. 8%)
  • The employer pays in a significant amount (20% or more isn't unusual)
  • The pension typically gains value in line with inflation, measured using the CPI
  • The schemes typically come with some form of contingency if you become seriously unwell before retirement age

However.... the schemes only pay out when you reach state pension age.

My question is: how much of a loophole is this? Can the government retroactively wipe out the value of accrued pensions simply by raising the state pension age?

Edit: just to be really clear, I'm not interested to know if the government can legislate to amend the pension contract directly (they can, but won't). I'm interested in understanding the potential risk posed by increases to state pension age.

  • Just to clarify: I know you can take money out early under various conditions but this usually comes with costs or penalties attached. Unless it is central to your answer I'd prefer that you ignore this complication. Commented Feb 25 at 22:55
  • I’m voting (albeit late) to close this question because it is better suited for Law@SE or politics@SE.
    – littleadv
    Commented Feb 26 at 18:58

2 Answers 2


I'm going to give an answer which is going to be partial and inconclusive, but is the best I can work out. I'm going to focus on the "Alpha" pension scheme which is newly introduced. People who have substantial accrued benefits in the previous schemes should retain the accrued benefits and all their conditions, including retirement age.

First: Yes, the 'normal retirement age' at which you normally start getting your pension is defined as the Statutory Retirement Age, and yes, the government can change the Statutory Retirement Age through legislation if they wish. However it's a decision that has serious consequences across the whole country. "Currently, the state pension age stands at 66, but will increase to 67 between May 2026 and March 2028. It is expected that from 2044 it will rise again to 68." Those scheduled increases should be factored into your retirement expectations. It's unlikely that that schedule will change substantially in the next few decades.

So the government can cause you to start getting your pension later. However the Alpha scheme also allows you to opt to get your pension early. So you could opt to start your pension when you originally thought you would. But the other catch is that starting your pension early involves a reduction in pension amount. So an increase in statutory pension age might result in you getting a lower pension.

What I have been completely unable to find is if there would be an extra accrual of benefits during the year that the pension is delayed that would compensate - partially or wholly - for the reduced pension. The accrual of benefits algorithm appears to be complicated, and I haven't found an accurate description.

This is exactly the sort of question you should ask the people who manage pensions where you work. Ask explicitly what effects a future increase in statutory pension age would have on your pension. If you get an answer please come back and let us know. The civil service and related jobs are highly unionised, and if your employer isn't telling you then your union will either know the answer or be working to find it out. Ask them.

To forestall some comments, please note that UK civil service pensions are not based on a "fund". Pension contributions are paid into general revenue and pensions are taken out of it.

  • "If your employer isn't telling you then your union will either know the answer or be working to find it out" - - that's a terrific point. Commented Feb 26 at 18:50
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    "if there would be an extra accrual of benefits during the year that the pension is delayed" - do you mean if the person continues to work for that year? If so why wouldn't there be accrual? And if not it seems obvious there wouldn't be. I know there are complications with accrual when working past the standard retirement age for a scheme, but those by definition wouldn't apply here. Commented Feb 26 at 21:05
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    I mean if the person isn't working. Old schemes were index linked, so there was some sort of increase in benefits even if you didn't work. I'm inclined to think you are right, but I'm hoping someone else knows for sure. Commented Feb 26 at 21:36
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    OK, so yes the benefits would be index linked (which they also are when in payment), but they wouldn't accrue other than that. [I haven't double-checked the rules, but I have enough general experience of how Alpha at least works to be fairly confident of it] Commented Feb 26 at 22:00
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    @DJClayworth I think these two links are references for the fact that you get index linking from Alpha both before and after leaving (even though they aren't the actual detailed scheme rules): civilservicepensionscheme.org.uk/knowledge-centre/…, civilservicepensionscheme.org.uk/knowledge-centre/…, Commented Feb 27 at 8:00

Can the government retroactively wipe out the value of accrued pensions simply by raising the state pension age?

The government, being supported by the majority of MPs, can do whatever it wants. So yes, in theory it can.

Even as a private contract, pension schemes need to be sound from actuarial perspective. I.e.: their assets must suffice to pay out the expected benefits. If they're not sound, the benefits will be devalued one way or another through a government mandated reorganization or plain bankruptcy. Since this is not a pension paid through general funds, taxpayers will not foot the bill (and if the taxpayers do end up footing the bill, then the government will have even more political support to restructure them).

Ignore the downvoters. People on this site often times downvote answers they don't like, but that doesn't change the reality. There have been various examples of pension fund nationalizations (e.g.: Hungary, Israel). Similarly, in the UK the government is very much in a position to tell funds what and how to do (example). Generally, when it comes to labor laws (which pensions are part of) - this is an area where laws are enacted to void contract provisions quite often.

That said, worrying now about future legislation is pointless. Once the law passes you can check what exactly the mechanisms in it are.


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