Source · Select Committees · Public Accounts Committee
Recommendation 16
16
Pensions are also a significant cost to public service employers.
Conclusion
Pensions are also a significant cost to public service employers. In 2019–20, employer contributions across the four main public service schemes rose in real terms by £6.4 billion, to £23.3 billion (around 24.3% of total payroll).34 This substantial increase has directly impacted on employer budgets, putting further pressure on frontline services.35 HM Treasury told us whenever there are unforeseen costs resulting from pension changes, particularly resulting from changes in the discount rate (a key assumption use to estimate the value of future benefits in today’s terms), it has provided additional funding to employers.36 For example, it recognised the potential impact of the 2019–20 increases to employer contributions and sought to mitigate this by providing £4.7 billion of additional funding at Budget 2019. However, this still means £1.7 billion of the increase was funded from employer budgets. HM Treasury told us there are always budget pressures that departments must manage in the normal course of their work.37
Government Response
Acknowledged
HM Government
Acknowledged
Employer contribution rates for public service pension schemes are determined at valuations which are held every four years. Valuations are a complex process which take several years to complete and are carried out by individual departments with scheme advisers from the Government Actuary’s Department (GAD), in accordance with Treasury directions. Valuations as at March 2020 are currently underway.