Background

Public service pensions are a major part of reward for millions of public sector workers, whilst also representing a long-term financial commitment for the government. They have been subject to major reforms in recent decades, most recently between 2011 and 2015, which were intended to manage the future costs of providing the pensions. 

The largest public service pension schemes operated by central government are unfunded, pay‑as‑you‑go, defined benefit schemes. Pensions are based on salary and length of service and are paid from current employee and employer contributions, with support from general taxation as needed.  

In 2024-25, the four largest public service schemes paid out around £46 billion to retired employees and dependants. 

HM Treasury is responsible for public service pensions policy, including overseeing affordability. In designing public service pension schemes, the government must consider long‑term affordability alongside the outcomes these schemes deliver for members and employers across the public sector. 

Scope

This report will examine how public service pension arrangements work and whether they are used effectively. It will assess:  

  • how HM Treasury manages the affordability of public service pensions and how affordability has changed. 
  • how pensions compare across public service schemes and with the wider labour market 
  • how public service pensions are used as part of reward strategies to support recruitment and retention. 

It will also highlight different public sector provision and pension reform models. 

The report will focus on the four largest central government pay as you go public service pension schemes: those for NHS employees, teachers, civil servants, and members of the Armed Forces. It will not examine the State Pension, the Local Government Pension Scheme, or the administration of public service pension schemes. 

NAO team  

Director: Vicky Davis  
Audit Manager: Maria Christina Eskioglou