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Pension Increase Policy

Published on May 15, 2023

Last update on March 7, 2025

Table of contents

Background

Pension increase policy in the public service refers to the upward adjustment (increase) of those pensions in payment that have been awarded under pre-existing public service pension schemes. It does not cover the post-retirement adjustment of pensions awarded under the Single Scheme.

Post-retirement increases to pensions in payment awarded under pre-existing public service pension schemes are generally not provided for under pension scheme rules, and therefore there is no guarantee or entitlement to such increases. A policy of increasing public service pensions in payment developed incrementally from the 1960s onwards as part of pay negotiations with public service trade unions.

Section 29(2) of the Pension Increase Act 1964 provides that the Minister for Public Expenditure, NDP Delivery and Reform may make regulations to provide for increases in public service pensions in payment. The Act does not prescribe what form those increases should take, or how they should be calculated. Such increases are awarded at the discretion of the Minister.

Current Policy – Pay Parity

The method of increasing public service pensions in payment known as ‘pay parity’ involves adjusting the occupational pensions of public service pensioners in line with increases applied to the wages or salary of the pensioner's grade at retirement.

This method of pension adjustment currently applies to pensions in payment under pre-existing public service pension schemes, having been agreed in the context of the Public Service Agreement 2024-2026. It will apply for the duration of that agreement, i.e. up to 30 June 2026.

Previous Policy: FEMPI Restoration

Although the pay parity method had historically been used to adjust public service pensions in payment, this non-statutory link to pay lapsed in 2010, when the public service salary cuts applied under the Financial Emergency Measures in Public Interests (FEMPI) legislation were not passed on to public service pensions in payment.

In 2017, the government agreed a policy on increasing public service pensions in payment for members of pre-existing schemes for the period to end-2020. The application of ‘pay parity’ during this period, took account of the impacts of the FEMPI salary cuts on the value of certain pensions awarded during that period. Under this policy, a pension increase would be applied only where the salary on which the pension was based was lower than that applicable to an equivalent serving staff member after a pay increase had been applied. This was to ensure alignment between the pensions awarded following the FEMPI salary cuts with the pay of equivalent serving staff who were receiving salary restoration. This comparison was necessary as many staff who retired prior to the FEMPI salary cuts continued to receive pensions based on higher, pre-cut salaries.

This method was used increase pensions for the term of the Public Service Stability Agreement 2018-2020 and continued during the Building Momentum Agreement up to end-2023, by which time all public service salaries had been restored to, or increased above, their pre-FEMPI level.

Pension increases in Commercial Semi-State Bodies

Pension increases in the wider public sector, which is generally understood as including Commercial Semi-State Bodies, are subject to different arrangements and generally require the approval of the relevant line minister and the consent of the Minister for the Department of Public Expenditure, NDP Delivery and Reform.

Further information on pension increases in Commercial Semi-State Bodies

Single Scheme

Pensions awarded under the Single Public Service Pension Scheme (‘Single Scheme’) are uprated annually in-line with the changes in the Consumer Price Index (CPI). Further information can be found on the Single Scheme website.

Public Service Pension Reduction (PSPR)

The Public Service Pension Reduction (PSPR) was a progressive reduction imposed on public service pensions in payment, which exceeded applicable exemption thresholds and applied during the period of the financial emergency. PSPR did not alter the gross value of public service pensions in payment. Instead, it applied by way of temporary reduction in the pay-out value of the impacted pension.

As PSPR was lessened and removed, the pay-out value of impacted pensions in payment increased. This was not a ‘pension increase’, but restoration of the temporarily reduced pension to its original amount. Pension increases involve application of an upward adjustment to the gross value of the public service pension.

Further information on PSPR.

Supporting information