September 2026 CPI is 3.5%

September’s CPI has been published, 3.5% – why’s that important for your public sector pension?

Because September CPI is used to calculate the following April’s annual increase for many public service pensions. So, although we still need the formal Treasury Orders before the April 2027 pension increases are officially confirmed, 3.5% is the figure we expect to see used from April 2027.

But, as always with pensions, where that 3.5% applies depends on the type of pension benefits you have.

For most public service pensions already being paid, we expect the full annual increase from April 2027 to be 3.5%.

In simple terms:

• £10,000 a year would increase to around £10,350
• £20,000 a year would increase to around £20,700
• £30,000 a year would increase to around £31,050

If your pension started being paid since 5 April 2026, you might receive part of the annual increase rather than the full amount.

If your pension is deferred/preserved

The 3.5% figure also matters if you’ve left your public sector pension scheme but haven’t started taking your pension yet.
Deferred public service pensions are protected from inflation. The public service pension increase arrangements cover pensions in payment as well as preserved, or deferred, pensions (including preserved lump sums). So we expect 3.5% to be the April 2027 increase for deferred public service pensions covered by these arrangements.
That’s useful to remember if you’re looking at an old pension statement.
The pension figure you were given when you left the scheme doesn’t necessarily stay at that amount until you retire. Your deferred benefits can continue to receive increases in the meantime.

What if you’re still paying into a CARE scheme?

September CPI is also relevant to the pension you’re building while you’re still working.

CARE stands for Career Average Revalued Earnings. Put simply, you build up pension each year and the pension you’ve already built is then revalued.
Different public sector schemes have slightly different rules.

• In the NHS 2015 Pension Scheme, active benefits are currently revalued using the relevant Treasury Order plus 1.5%. So, a Treasury revaluation figure of 3.5%, means a revaluation of 5.0% on all the 2015 Scheme pension you’ve added as a slice of your pay.
• In the Teachers’ Pension Scheme, active career-average benefits are revalued using the Treasury Order plus 1.6%. With a 3.5% Treasury figure, that would be 5.1%

(Deferred benefits use only the Treasury Order not with the extra 1.5% NHS or  1.6% TPS)

• In the Civil Service Alpha scheme and 2014 Local Government Pension Scheme (LGPS) active pension accounts are revalued by the Treasury Order only, so the expected figure is 3.5%.

You don’t need to get too bogged down in the mechanics.

The important point is that inflation doesn’t just affect pensions that are already being paid. It can also affect the pension you’re building while you’re still working.

What about the older final salary pensions?

Many public sector workers now have more than one type of pension benefit.
You may have older final salary pension benefits alongside newer CARE benefits, and the different parts of your pension don’t necessarily work in exactly the same way.
Members may also retain a final salary link, meaning later pensionable pay is still used to calculate older final salary benefits. For example, the Teachers’ Pension Scheme confirms that eligible members with both final salary and career-average pensions can retain a salary link, subject to its rules around continuity of scheme membership. This is why simply taking every figure on your pension statement and adding 3.5% isn’t necessarily the right way to work out what your pension might be worth.

So, what do we know?

1. The important number is now confirmed:
   September 2026 CPI, 3.5%, announced by the Office for National Statistics on 21 October 2026.
2. We expect it to feed through into public service pension increases from April 2027, including pensions in payment and deferred pensions, with the individual scheme rules determining how active CARE benefits are revalued.
3. There is one important distinction at this stage:
   The 3.5% CPI figure is confirmed. The April 2027 public service pension increases still need to be formally confirmed.
   But we now know the figure on which those increases are expected to be based.

What does 3.5% actually mean for your retirement plans

And this is the bit that really matters.

Knowing that CPI is 3.5% is useful. Knowing what that means for your own pension and retirement plans is much more useful.
You might have an NHS pension and an LGPS pension. You might have a mixture of final salary and CARE benefits. Perhaps you’re considering retiring at 60 rather than 62, reducing your hours, taking flexible/partial retirement or taking different pensions at different times.
Those are very different scenarios, and a headline percentage can only tell you so much.

At Pengage, our Pension Modelling Service is designed to help you understand your numbers.

We review the pension information you provide, sense-check it for apparent anomalies and can model up to 4 different scenarios chosen by you, such as different retirement dates, working patterns or dates for taking your benefits.

You’ll receive pension estimates and a tailored report explaining the results. Where relevant and within the scope of the service, this can also include McCloud considerations, maximum lump sum figures and an Annual Allowance assessment.

We then meet with you online to talk through the report and help you understand the different scenarios you’ve asked us to model.

We don’t provide regulated financial advice or tell you which option you should choose. Our role is to give you the pension information, technical support and modelling you need to better understand what your different options could look like in pounds and pence.