Commenting on the closed public service pensions consultation: Cost control mechanism, Robert Bilton, Head of LGPS Valuations, says:

“We welcome the proposed changes to the mechanism, and the stability these will bring to future cost cap valuation results. In particular, the ‘economic check’ will help to reduce the potential for ‘perverse’ results to occur. The check should make it less likely that we will see a recurrence of the situation where benefit improvements are proposed at the same time as contribution rate increases from the 2016 actuarial valuations.

“To achieve an even stronger result we believe the Government could go one stage further and introduce a qualitative review of the raw results from the mechanism. This would provide a ‘common sense’ check on what is otherwise a very objective and formulaic process. The governance arrangements and stakeholders involved in such a review would need careful thought.

“Finally we do not believe that the SCAPE discount rate should be used for LGPS funds. Whilst basing the SCAPE rate on UK GDP may be a good measure for unfunded public service schemes, the funded LGPS has a significant level of investment in overseas markets, and across a broad range of asset classes. We would prefer that the LGPS cost control mechanism uses a discount rate which reflects the expected return from the overall asset allocation of LGPS funds.”