- HM Treasury has confirmed the existing methodology of using long-term GDP forecasts to discount the future value of public service pensions in order to set the charge levied on employers.
- Discounting against future GDP growth reflects the claim pension promises are making on future revenues.
- OBR’s forecasts for long-term GDP have nosedived since HMT first landed on this answer in 2011, which means employers are likely to see a dramatic increase in their contributions.
- Rising employer contributions do not affect public sector net borrowing, but may affect the amount of money employers can spend on other priorities.
- The wisdom of this approach depends on how accurate the OBR’s 50-year GDP forecasts are.
Financial Times — World — Public Pensions — Workplace Pensions — Uk Business & Economy — Ft Alphaville
The GDP forecast bug in public sector pensions
HM Treasury has confirmed the use of long-term GDP forecasts to discount the future value of public service pensions to set charges on employers, but the nosedive of GDP forecasts may cause a dramatic increase in contributions.