Half a million civil servants to keep final salary pensions as unions agree move to career average scheme

An estimated 500,000 civil service workers will retain their final salary pensions under a deal expected to be announced today.

But new recruits to the service will be switched to a career average pension scheme, agreed by Whitehall unions. For many staff, especially those who reach senior levels, this will mean a cut in their expected retirement income.

To compensate and make the deal ‘cost neutral’, the government has agreed to speed up the rate at which staff accrue their pension rights.

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Ministers are expected to hail the move as a significant step in capping the rising costs of public sector pensions. In 2006, the public sector pension deficit jumped almost one-third to £960bn, according to pension consultancy Watson Wyatt.

In the private sector, most guaranteed final salary schemes have closed to new members, and in many cases, existing staff have been asked for higher contributions.