GAD completes 2020 actuarial valuations
Actuarial valuations for public service pension schemes are now published, most of which set employer contribution rates and assess the cost control mechanism.
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The Government Actuary’s Department (GAD) has completed its work on the 2020 actuarial valuations for the public service pension schemes.
These reports cover 20 public service pension schemes across all regions of the UK for 8 major workforces encompassing 15 million members.
The valuations inform more than £40 billion of public spending each year for people in the following workforces:
- police
- civil servants
- the judiciary
- local government workers
- teachers
- NHS workers
- fire and rescue workers
- the armed forces
The valuations are undertaken every 4 years, and this is the third time GAD has undertaken this project under the revised framework.
These valuations assess the results of the cost control mechanism, and, for the unfunded schemes (namely all schemes excluding the local government schemes), each report sets out the employer contribution rates to be payable from April 2024.
Each valuation results report is accompanied by an associated assumptions and data report, and these set out the recommended demographic assumptions and the underlying membership data.
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Cost control
The government established a cost control mechanism for public service pension schemes in 2012 with 3 main aims, namely to:
- ensure a fair balance of risks between scheme members and the taxpayer
- maintain the value of such schemes to their members
- provide stability and certainty of member benefit and contribution levels, with changes only being triggered by “extraordinary, unpredictable” events
Scheme costs are measured at each actuarial valuation. If costs move too far from a target cost, a breach of the cost cap corridor is said to have occurred. Therefore, member contributions or benefits must be adjusted to return costs to the target level. There were no breaches reported as a result of the 2020 valuations.
The cost control mechanism was reviewed by government in 2021 and a number of changes were made.
Valuation outcomes
GAD actuary and Head of Public Service Pensions Jan Claisse said: “This cycle of valuations has been a particularly interesting one. The amount of change and uncertainty we’ve seen with the review of the cost cap process, the implementation of the McCloud judgment, and the SCAPE discount rate review, has meant we’ve had to be particularly flexible in how we’ve worked.
“This has been shown internally, with the development of new technology and processes, and a truly ‘one GAD’ approach to the project. It has also been demonstrated in the way we have worked with scheme managers, HM Treasury, and other scheme stakeholders. Together we have worked to ensure the valuations have been delivered in parallel with a wide range of onerous scheme change initiatives.
“Throughout the project we’ve worked to challenge ourselves to be more efficient and we see that in many aspects of our work, including the more visually appealing reporting style adopted.”