Government Actuary Backs New SCAPE Discount Rate Methodology
The Government Actuary’s Department (GAD) has stepped in to support the government’s rethink on the SCAPE discount rate. This critical rate helps set employer contribution levels for public service pension schemes.
What is SCAPE?
SCAPE stands for Superannuation Contributions Adjusted for Past Experience. It’s the formula used to value unfunded public service pension schemes and determine how much employers need to chip in.
Consultation on Methodologies
The government launched a public consultation to weigh up two different methods for calculating the SCAPE discount rate. They set three key goals for the new approach:
- Fair reflection of pension costs
- Consideration of future risks to government income
- Stability in funding requirements
Government’s Verdict: GDP Growth Wins
After reviewing the consultation feedback, the government concluded that basing the rate on long-term future GDP growth expectations strikes the best balance.
As a result, the SCAPE discount rate has been revised to 1.7% above the Consumer Prices Index (CPI) inflation rate, refining how pension costs are calculated going forward.
