24th June 2021 HM Treasury Ministerial statement and publication of consultations

A Written Ministerial Statement has been laid today, announcing the publication of two consultations. The first is about proposed reforms to the cost control mechanism (CCM), following the publication of the Government Actuary’s review of the mechanism. There are 3 proposed changes to the existing mechanism, the 1st would change the mechanism to operating only in the reformed schemes; the 2nd would widen the “corridor” from the existing 2% margin to 3%; and the 3rd would introduce an additional “economic check” when there is a breach of the mechanism to ensure that broader economic conditions are considered before any breach is implemented. On page 16 of the consultation document, HM Treasury notes that further consideration will need to be given to the detailed implementation of the “reformed scheme only design” in the LGPS, given the effects of the underpin. The second consultation is about the discount rate used in valuations of unfunded public service pension schemes and potential changes to the SCAPE methodology used. The primary use of the SCAPE discount rate is to determine the level of employer contribution rates in the unfunded public service pension schemes, but it is also used in the production of actuarial factors in the LGPS. Both consultations run for 8 weeks, closing on August 19th 2021.