Pension cost cap breach decision expected early in 2019
A decision on how to address the public service pension cost cap breach reported by HM Treasury in September of this year is expected in early in 2019. The Government Actuary Department’s (GAD) draft actuarial valuation report for the fire pension schemes indicates that employer contributions need to increase for the four year period 1 April 2019 – 31 March 2023.
The public service pension scheme cost cap is designed to limit the cost to the taxpayer of providing pensions to public service workers. The target level of the cap is set as a percentage of pensionable payroll. If a valuation shows that costs have risen or fallen by more than 2%, action must be taken to redress the balance. In this case the costs have fallen by more than 2%. There are a number of reasons why the scheme has breached the cost cap, including assumptions which were made that firefighters would be earning more and living longer than they actually are.
The Home Office and (Fire Pensions) Scheme Advisory Board (SAB) are currently in discussions and must seek to reach an agreement on how to proceed in January. The Chief Executive, Tristan Ashby said:
“Scheme members – including the Fire and Rescue Services Association – have been consulted via the SAB. We are considering the options available, but we will ultimately be pushing for what is in the best interests of our members.”
Our members need to be clear that this (floor) breach will lead to a benefit for members of the 2015 fire pension scheme but an additional cost to employers (contribution rates). Representative bodies on the board have worked together to identify the most flexible and beneficial method of providing this change so that it is fair (as possible) to all scheme members, taking into consideration age and length of service. It is encouraging to note that all rep bodies are in agreement on the method of delivery, the challenge is seeking agreement with the Home Officer via the SAB.
We will keep members informed when further information becomes available.