Cost control mechanism

The government has announced that the pause of the cost control mechanism will be lifted, and the cost control element of the 2016 valuations process will be completed. The costs of addressing the discrimination identified in the McCloud judgment (the proposals for which are set out for public consultation) will be included in this process.

The cost control mechanism is designed to take account of ‘member costs’ (costs that affect the value of schemes to members). The McCloud remedy proposals – to give members in scope a choice of scheme benefits for the remedy period – will increase the value of schemes to members. Therefore, the costs associated with this will be included in the completion of the cost control process. This means that results will show higher costs than would otherwise have been expected.

However, the government has confirmed that no member will see a reduction in their pension benefits at the 2016 valuations.

The policy detail of the 2020 valuations process, and the cost control mechanism, will be set out in due course. As part of the valuation process the government has committed to providing as much notice as possible to members, employers and administrators about any changes to contribution rates.

To understand more on the cost cap mechanism, please read our factsheet.

Last Updated: 06/04/2021 11:24