New cash equivalent transfer value (CETV) factors for 21 public service pension schemes have been released, enabling the resumption of member calculations that were temporarily suspended. The update, provided by the Government Actuary’s Department (GAD), follows a significant adjustment to the SCAPE discount rate by HM Treasury.
On May 19, 2024, HM Treasury announced a change to the SCAPE discount rate, increasing it from CPI + 1.7% per annum to CPI + 2.0% per annum. This revision to the discount rate, which is crucial for valuing future pension liabilities, immediately necessitated a halt to certain member calculations for public service pension schemes. The urgency stemmed from the fact that existing CETV guidance notes became obsolete overnight, requiring new factors to accurately reflect the revised valuation methodology.
The suspension affected calculations relating to approximately 200 tables of factors used across the various public service pension schemes. Recognising the potential impact on scheme members, especially those undergoing life events such as divorce proceedings where pension valuations are often critical, GAD prioritised the rapid production of the new CETV factors. This involved close collaboration with scheme managers and administrators to ensure accuracy and swift deployment.
GAD actuary, Sam Watts, commended the team's efforts, stating that new CETV factors were delivered to all affected schemes within 11 working days of the SCAPE announcement. This quick turnaround significantly minimised the period during which calculations were suspended. Scheme administrators can now proceed with implementing the revised factors and respond to member requests, helping to alleviate any backlogs or delays.
While CETV factors are now available, GAD's focus is shifting to the less frequently used 'transfer-in' factors, which currently remain suspended. The swift resolution for CETVs underscores the importance placed on ensuring the smooth operation of public service pension transfers and valuations, particularly for individuals navigating complex personal circumstances.
The change in the SCAPE discount rate affects the valuation of public sector pensions, which can have implications for how benefits are transferred or valued in certain situations. While it doesn't directly alter the pension benefits received by current retirees or workers, it impacts the actuarial calculations used for transfers out of these schemes, providing a more up-to-date reflection of future liabilities.