The Government Actuary’s Department (GAD) has now published cost cap valuation reports for all 20 public service pension schemes covering 8 major workforces. These included the NHS, teachers and police.
No changes to member benefits or member contributions are required as a result of these reports.
Cost cap valuation reports
The government established a cost control mechanism for public service pension schemes to ensure a fair balance of risks between scheme members and the taxpayer.
Employer cost caps were set in 2015, at the introduction of reformed pension schemes. If subsequently the cost of the scheme moves outside a corridor above or below the employer cost cap, corrective action is required.
For all 20 schemes, no corrective action to change benefits or member contributions are required as a result of the cost cap valuation reports. This is because the cost of the scheme lies either:
- within the ±2% corridor, or
- above the ±2% corridor, but the Public Service Pensions and Judicial Offices Act 2022 provides that such ‘ceiling breaches’ from the 2016 cost cap valuations have no effect
Getting to this point
The costs of the schemes were expected to be calculated for the first time in the 2016 valuations.
Following the Court of Appeal’s judgment in the McCloud and Sargeant cases, the government paused the cost control element of the 2016 valuations in January 2019.
In July 2020 it announced the pause would be lifted. Then HM Treasury Directions made in October 2021 set the detailed requirement for completing the valuations.
GAD has now published cost cap valuation reports for all 20 of the public service pension schemes covering 8 major workforces:
- civil servants
- the judiciary
- local government workers
- NHS workers
- fire and rescue workers
- the police
- armed forces
GAD actuary Michael Scanlon led on the project. He said: “The final 3 reports complete the publication of the outcome of the 2016 round of cost cap valuations.
“These reports are vital actuarial analyses of pension schemes in the Civil Service and in key public service organisations across the UK.”