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Public Service Pensions Cost Cap Review

Earlier this year we highlighted to our Members that some unions had brought legal actions against the Government over its decision to include the costs of the McCloud remedy within the 2016 scheme valuations.


The cost control mechanism was designed to control changes in “member costs” of public service final salary schemes. Although AFPS are non-contributory, the AFPS 15 Actuary is still required to identify “member costs” so that if they stray above or below a margin (the cost cap), then benefits can be reduced or improved. Following the 2016 scheme valuations, it was accepted that costs had fallen below the margin, but Government froze improvements against costs arising from the McCloud case. Some public sector unions then brought legal actions against the Government and these matters are still to be resolved.

In the meantime, HM Treasury has asked the Government Actuary’s Department (GAD) to review the existing “cost cap mechanism” to assess whether or not it is continuing to meet its objectives of being fair to taxpayers and to scheme members. The review made some recommendations for change.

The Government issued a public consultation here, which closes 19 August. The Forces Pension Society is considering its response.

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