Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Separately, HM Treasury has some concerns about the measures it has in place to control...
Conclusion
Separately, HM Treasury has some concerns about the measures it has in place to control rising costs. As a part of its 2011–2015 reforms, government put in place a ‘cost control mechanism’ designed to share costs fairly between employees and employers.18 The mechanism is built into the four-yearly pension valuation process, and its purpose is to control costs for taxpayer, to maintain value of pensions for scheme members’, and to achieve stability. If certain costs rise, members may see an increase in their contribution rate or a fall in the rate at which their benefits build up. Similarly, if certain costs fall, members may see a reduction in the amount they contribute, or an increase in their future benefits.19
Government Response
Acknowledged
HM Government
Acknowledged
HM Treasury is setting out in amending Directions the detail of how the cost control element of the 2016 valuations will be completed. These will be published following engagement with stakeholders before schemes then finalise results. The government announced in February 2021 that any ceiling breaches that occur at the 2016 valuations will be waived, as it would be inappropriate to reduce benefit levels based on a mechanism that is not working as intended. However, any benefit increases due as a result of any floor breaches will be delivered. Once results are finalised, schemes will commence discussions with Scheme Advisory Boards on how to rectify any floor breaches that occur.