Civil service staff on lower salaries will receive better pensions in exchange for the elimination of final pensions arrangements for new recruits under a new scheme agreed between unions and employers.

The final salary pension is to be phased out for new civil service recruits to allow 500,000 existing staff to keep their final salary pensions provisions.

New entrants, particularly those hoping to advance a long way up the career ladder and through the pay scales, stand to make significant losses as final salary pensions vanish.

Their pensions will now be determined instead by their average salary over the whole period of employment.

The civil service scheme brings public sector pensions arrangements up to speed with trends in the private sector, where most final salary pensions schemes have been closed to new entrants.

Last year, according to pension consultants Watson Wyatt estimates, the public sector pension deficit jumped almost a third to £960 billion.

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