Figures from the Office for National Statistics (ONS) released today also make it likely that the Basic State Pension will rise from £97.65 to £102.15 per week in April 2011.
In his Emergency Budget in June, the chancellor, George Osborne, announced the pensions of retired public servants would rise in line with inflation as measured by the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI) from April 2011.
This change also applies to payments from the State Earnings Related Pension Scheme and the State Second Pension as well as some social security benefits.
The increases awarded each April are based on the change in prices during the 12 months to the previous September. Figures released by the Office for National Statistics this morning record that CPI inflation in the 12 months to September 2010 was 3.1% while RPI inflation was 4.6%.
John Ball, head of UK pensions at Towers Watson, said: "Someone receiving £10,000 this year from a public-sector pension scheme can expect this to rise to by £310 in April. Under the old rules, it would have been £460. CPI inflation is usually lower than RPI inflation so the gap between the pension they would have received and the pension they will now receive should get wider over time.
"If the forecasts used in the Budget prove correct, their annual income should be about £900 lower than it would have been by 2016. As Lord Hutton argued, the taxpayer has been promising more expensive pensions to its employees than it should have been. The rules governing these schemes allow the Government to measure inflation however it wants to, and changing to CPI is a way of sharing the pain with people who worked in the public services in the past."
On 8 July, pensions minister Steve Webb said increases to "all occupational pensions" should be based on CPI inflation. However, it is unclear how extensive this reform will be.
Ball added: "Three months after the Government said CPI inflation would be used in private-sector schemes, employers and trustees are still in the dark as to what the policy is. It has not said employers will be allowed to override scheme rules without trustees' consent, nor ruled this out. Unless that happens, many pensioners will still be able to look forward to RPI-based increases.
"In most schemes, the situation is clearer when it comes to people who have left the employer but not yet retired. Here the member's loss is their former employer's gain."
