The Government Actuary’s Department has carried out an actuarial valuation of the Armed Forces Pension Scheme and related arrangements (AFPS or ‘the scheme’) as at 31 March 2012 (the effective date). The valuation has been undertaken in accordance with The Public Service Pensions (valuations and employer cost cap) Directions 2014, which specify certain assumptions and require other assumptions to be the MOD’s best estimates.
The results of the valuation specify the rate of employer contribution payable for the 4 year period from 1 April 2015 and the employer cost cap.
The key results of the valuation are:
Employer contribution rate (also known as the SCAPE rate)
52.4% of pensionable pay for officers and 49.6% for other ranks (equivalent to 50.4% overall).
Employer cost cap: 34.6% of pensionable pay
This is a mechanism introduced by the government to provide backstop protection to the taxpayer against changes in scheme costs. If the cost cap cost of the scheme determined at a future valuation differs from the employer cost cap by more than 2% of pay, then action must be taken to bring the cost back to this level. (The cost cap cost of the scheme excludes certain scheme costs, in particular those relating to deferred and pensioner members of the existing pre-2015 schemes).
The employer contribution rate is expected to be reassessed at the actuarial valuation to be carried out as at 31 March 2016 (and each subsequent 4 yearly valuation). The next revision to the employer contribution rate is expected to take effect from 1 April 2019. The financial position relative to the employer cost cap will also be reconsidered at each 4 yearly valuation.