Update to the Cost Control Mechanism and Discount Rate Methodology consultations

Cost Control Mechanism consultation
On 4 October, the government published the outcome (This link opens in a new window) of the cost control mechanism consultation. Consultees were asked to respond to a total of seven questions with the responses to these being considered in making final policy decisions.

They proposed to make three changes to the cost control mechanism because making these changes would establish a fairer balance of risks between the government and scheme members and create a more stable mechanism. These were:

  • Moving to a reformed scheme only design (for Teachers’ Pensions this is career average)
  • Widening the cost cap corridor, which is currently set at +/-2% of pensionable pay for all schemes, to +/-3%. The corridor refers to the ceiling / floor which, if breached could lead to an increase in costs or improved benefits
  • Introducing an economic check, as the long-term economic outlook (such as changes in expected long-term Gross Domestic Product (GDP) or the long-term earnings assumption) is not considered when determining whether breaches should result in a change to member benefits.

Further detailed information can be found in the report on GOV.UK (This link opens in a new window).

Discount Rate Methodology consultation
A response to the consultation on the methodology used to determine the SCAPE discount rate will be provided at a later date as the government is still considering stakeholders‘ responses to this.

Last Updated: 05/10/2021 09:05