Updated October 30, 2026. Quick answer: Illinois SERS pays its automatic increase each January 1, so the next is January 2027. For Tier 1 it is a fixed 3% of the current pension, compounded, so January 2027 is 3% for eligible Tier 1 retirees. For Tier 2 it is the lesser of 3% or one half of the CPI-U increase, not compounded, and the Tier 2 percentage is not set yet.
More on public pension retirement ages and eligibility: the Illinois SERS retirement age and eligibility rules by tier.
Estimate an Illinois SERS Tier 1 pension from service, age and final average compensation: Illinois SERS Tier 1 retirement calculator.
Tier 1: a fixed 3%
The SERS Tier 1 handbook says: “SERS retirees receive a 3% automatic increase to their pensions on January 1 following their first full year of retirement, or attainment of age 60, whichever is later.” “If you retired using the Rule of 85, you are eligible for your first increase on January 1 following your first full year of retirement, even if you are not age 60.” It adds: “Future increases of 3% of your current pension will also be made each January 1 thereafter.” The statute, 40 ILCS 5/14-114, says: “On each January 1 following the date of the initial increase under this subsection, the employee’s monthly retirement annuity shall be increased by an additional 3%.” On compounding, it says: “all automatic annual increases payable under this Section shall be calculated as a percentage of the total annuity payable at the time of the increase, including previous increases granted under this Article.”
Tier 2: the lesser of half the CPI-U or 3%
The SERS Tier 2 handbook says: “SERS Tier 2 regular formula plan retirees receive a non-compounded increase to their pensions on January 1 following their first full year of retirement, or age 67, whichever is later.” It continues: “Such increase shall equal the lesser of 1/2 the increase to the Consumer Price Index-U or 3%.” Another SERS Tier 2 publication says: “If you retire before age 67 with a reduced retirement benefit, you will receive a pension increase of 3% or one-half of the Consumer Price Index for the preceding calendar year, whichever is less, every January 1 after you turn age 67 and have been retired at least one full year.”
Who is covered
This page covers regular formula retirees in Tier 1 (members before January 1, 2011) and Tier 2 (members after December 31, 2010). It does not cover TRS Illinois or other Illinois systems. SERS says of Tier 1: “Future increases are not limited by the provision in the Illinois Pension Code that prevents a SERS base retirement annuity from exceeding 75% of the final average compensation.” Its Tier 2 publication says: “These pension increases are not limited by the 75% maximum.”
Where 2027 stands
The Tier 2 increase for January 2027 is not set yet: SERS prints the formula but no Tier 2 percentage, and this page updates when SERS publishes one. Tier 1 is set by law at 3%. The Tier 2 statute section could not be read for this page, so the Tier 2 rule rests on the SERS handbook.
A worked example
As a computed illustration (not a source figure), a Tier 1 retiree with a current monthly pension of $2,000 (invented, for the computation) would see a January increase of $60 (computed) a month. A Tier 2 retiree would see at most that amount on the original pension, and less if half of the CPI-U increase is below 3%.
Common mistakes
- Applying the fixed 3% to a Tier 2 retiree. Tier 2 gets the lesser of 3% or half of the CPI-U increase.
- Expecting Tier 2 increases to compound. SERS describes them as non-compounded.
- Looking for a 2027 Tier 2 percentage that SERS has not printed.
Related: Illinois SERS retirement decisions, how public pension decisions work, and whether Illinois taxes pensions.
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Answer againSources
- Illinois State Retirement Systems, SERS, SERS Tier 1 Retiree and Survivor Benefits Handbook: ilsrs.illinois.gov
- Illinois General Assembly, 40 ILCS 5/14-114 Automatic increase in retirement annuity: ilga.gov
- Illinois State Retirement Systems, SERS, SERS Tier 2 Retiree and Survivor Benefits Handbook: ilsrs.illinois.gov
- Illinois State Retirement Systems, SERS, Tier 2 Regular Formula (web page): ilsrs.illinois.gov
- Related official page (not quoted): IRS Tax Topic 410, Pensions and annuities: www.irs.gov
- Related official page (not quoted): IRS Tax Topic 411, Pensions: the General Rule and the Simplified Method: www.irs.gov
Read from the primary documents linked above on October 30, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.