The Consumer Price Index (CPI) is one of the ways inflation is measured in the UK. The CPI is published by the Office for National Statistics (This link opens in a new window) and the government uses CPI as one of the measures for uprating state pensions. The CPI is also used for increasing public service pensions such as those paid by the Teachers’ Pension Scheme.

It was announced on 19 October 2022 that the increase in inflation for the year to September 2022 was 10.1%. This increase is expected to be ratified in a Pensions Increase (Review) Order in early 2023 and (when confirmed) will be applied to member benefits in the Teachers’ Pension Scheme in a number of ways from April 2023.

Pensions in Payment

Pensions in payment are reviewed each year in line with inflation. This is known as Pensions Increase (PI). PI takes effect every April and is based on the Consumer Price Index (CPI) up to the September of the previous year. As a result, any increase applied in April 2023 will be driven by the CPI of 10.1% announced for the year to September 2022. We’ll be able to confirm the Pensions Increase in early 2023.

If you reached State Pension Age before 6 April 2016 and have a Guaranteed Minimum Pension, part of the inflation increase may be provided by the State. Please note that if you started receiving your pension during the 2022-23 scheme year, the amount of PI will be apportioned.

In-service members

For active members, your service in the career average scheme will be revalued on 1 April 2023 based on the ‘Treasury Order’. We expect the indexation to be 11.7%. This is because in-service teachers receive an additional 1.6% enhancement on top of the rate of inflation of 10.1%. However, this is still to be confirmed.

If you left the Scheme during the 2022-23 scheme year, the amount of index adjustment will be apportioned depending on the number of complete months when you left.

If you have a ‘final salary link (PDF, 76 KB) (This link opens in a new window)’ in respect of previous benefits in the final salary scheme, there are two methods used in calculating the final average salary. The highest of the two calculations will be used in calculating benefits. The method involving the best three consecutive revalued average salaries in the last ten years prior to leaving service will take account of Pensions Increase factors at each point there has been a change in your salary in the last ten years.

Deferred Members

If you’ve deferred benefits with us and left service up to 12 months before April 2023, once confirmed by parliament, you’ll also see an increase in these pension benefits by 10.1%.

Annual Allowance for members who are in-service during the 2022-23 tax year

There will be an uplift applied to the opening balance of pension benefits at the beginning of the 2022/23 tax year of 3.1%, which was the equivalent increase in the 12 months to September 2021. On account of the expected level of index-adjustment applicable at 1 April 2023 for in-service teachers, this may affect high earners, those who have had an increase in salary (e.g., due to promotion), and those members who have made further pension savings in the tax year, we recommend that individuals seek independent financial advice regarding their circumstances.