Civil Service Pensions have just published the long awaited Scheme Valuation report for 2020.
Members may recall that public service schemes put on hold the 2020 actuarial valuation while the 2016 valuations were revisited once the age discrimination cases (McCloud and others) were concluded.
Scheme valuations are carried out every three or four years to check the scheme finances. Of course as a public service scheme the civil service pension scheme is an unfunded scheme and pensions are guaranteed by Government. However, the Government Actuary has to carry out a Valuation similar to a private scheme to ensure the right contribution level is set.
The criteria for the Valuation includes life expectancy, which as we know is not expected to rise as quickly as originally expected.
The demographics are important. As at 2020 the scheme membership was over one and a half million members and although the number of pensioners has increased (572K plus 105K dependants pensions) from 2016 the number of younger active scheme members has also increased by 7.6 percent to just under half a million.
There has generally being more women than men working in the civil service and this is reflected in the scheme membership with 55 percent women. Like the gender pay gap, the average women’s pensions are less. In 2020 pay for Women averaged £32,317 full time equivalent and for Men £35,572.
Women’s Civil Service pension averaged £6,251 and Men £11,369 reflecting historic grade differences and part time working/shorter career patterns (as at 2020) .
The Valuation takes into account both scheme factors and economic factors. This determines costs of paying benefits in the future and how much that can be offset. There are strict Treasury Directions which sets out calculations.
CSPA Pensions Cases Manager Christine Haswell commented:
“The headlines are that as some costs have increased, including the costs of paying out pensions (29.2%); and to recover the deficit of previous years (5.9%); the age discrimination Remedy costs (1.1%) will also need to be paid for. Other factors considered is a downward trend in economic growth and a future scheme surplus meaning Employer contributions will increase by 1.7 percent for the period 1 April 2024 and 31 March 2027 to 28.7 percent of pensionable pay. Member contributions should remain averaged at 5.6 percent of pensionable pay and no changes to benefits will apply”.
“For pensioners fully retired there should be no change. Disappointing for active members who under the original criteria in 2016 should have had some improvements now they are not available”.
To read the full Valuation Report click this link link below: https://www.civilservicepensionscheme.org.uk/media/qgbfvy5h/civil-service-gb-valuation-report_18_9_23.pdf