Government Actuary Department Backs New Pension Discount Rate Method
The Government Actuary’s Department (GAD) has thrown its weight behind the government’s review of the SCAPE discount rate methodology. This rate is crucial for setting employer contribution levels to public service pension schemes.
What is the SCAPE Discount Rate?
SCAPE stands for Superannuation Contributions Adjusted for Past Experience. It’s the formula used to calculate how much public sector employers need to put into unfunded pension schemes.
Two Methodologies Under the Microscope
A public consultation invited opinions on two possible methods for determining the SCAPE discount rate. The government laid out three key goals for the decision:
- Fair reflection of pension costs
- Consideration of future risks to government income
- Stability of the discount rate over time
New Rate Set After Public Consultation
After reviewing feedback, the government decided that a method based on long-term future GDP growth expectations best hit the mark. As a result, the SCAPE discount rate has been adjusted to 1.7% above the annual Consumer Prices Index (CPI) inflation rate.
