HM Treasury has published Amending Directions which allow public service pension schemes to complete the Cost Control element of the 2016 valuation process.

The results confirm that the Cost Control costs of the Scheme at the 2016 valuation are 1.3% above the baseline level, which means that as they remain within the target range, no adjustments to benefits are needed.

This process had previously been paused following the uncertainty from the McCloud and Sargeant judgments. These Amending Directions confirm that the McCloud remedy will be captured as a ‘member cost’ in the completion of the 2016 valuations. This is the correct approach given that addressing the discrimination identified by giving members a choice of scheme benefits for the remedy period, involves increasing the value of the Scheme.

The Amending Directions instructs the Scheme on how the McCloud remedy should be considered in calculations and the assumptions when doing so.

The government has recently announced proposed reforms to the Cost Control Mechanism which will be implemented in time for the 2020 valuations. These reforms don’t affect the 2016 valuations. However, the government believes that it would be unfair for members to see their benefits reduced based on the results of a mechanism, which the government has acknowledged isn’t properly meeting its objectives.

They have therefore announced that any ceiling breaches found when schemes complete the 2016 valuations will be waived. This means that no members will face a reduction in their benefits because of the 2016 valuation. Any floor breaches will be honoured, and benefits increased.

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