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Reference: LEA231109
Mr Nick Leaton
By Email (WhatDoTheyKnow.Com)
21 December 2009
Dear Mr Leaton
Freedom of Information Act
Thank you for your e-mail of 23 November 2009 in which you requested information about
the discount rate used to calculate the present value of liabilities in respect of state employee
pensions and the state pension, and how the discount rate was established.
Discount rates – Public Sector workers’ pensions
The most recently published information concerns the total accrued liability of the Pay-As-
You-Go public service occupational pension schemes as reported in published accounts as
at 31 March 2008, estimated by the Government Actuary’s Department (GAD) to have been
£770 billion
1. The discount rates used are disclosed in the published accounts. The
rationale underlying these discount rates was published in a previous Long-term public
finance report, as follows:
The key actuarial assumptions used to value the liabilities of individual schemes are
set out in the relevant reports by the scheme actuary and have been reported in
scheme resource accounts using the FRS17 accounting methodology, applied in
accordance with guidance approved by the Financial Reporting Advisory Board
(FRAB) for pension schemes funded directly by central Government; or the Chartered
Institute of Public Finance and Accountancy (CIPFA) for the pension schemes for
police and firefighters.
2
The resource accounts of central government Pay-As-You-Go public service pension
schemes are available from TSO
3. The FRS17 is available from the Accounting Standards
Board website
4. The guidance approved by the Financial Reporting Advisory Board and
associated documents are available from the HM Treasury website
5.
Discount rates – State pensions
In my letter of 20 November 2009 we disclosed that as at 31 March 2005, and based on the
legislation then in force, the value of accrued rights to basic state pension was £1,020 billion
and the value of accrued rights to additional pension, net of amounts given up as a result of
1 Long-term public finance report: an analysis of fiscal sustainability December 2009 Box 6.B p49
http://www.hm-treasury.gov.uk/d/pbr09_publicfinances.pdf
2 Long-term public finance report: an analysis of fiscal sustainability March 2008 Box 4.3 p38
http://www.hm-treasury.gov.uk/d/bud08_longterm_586.pdf
3
http://www.official-documents.gov.uk/
4
http://www.frc.org.uk/asb/technical/standards/pub0206.html
5
http://www.hm-treasury.gov.uk/psr_reporting_centralgovernment.htm
Finlaison House 15-17 Furnival Street London EC4A 1AB T: +44 (0)20 7211 2601 W: www.gad.gov.uk
Direct Line: +44 (0)20 7211 2666 Fax Number: +44 (0)20 7211 2630 Email: [email address]
contracting out, was £330 billion. We also explained that the discount rate used in the
calculation was 3.5% a year over price inflation, consistent with the rate used for pension
liabilities in Government resource accounts as at 31 March 2005.
On a point of detail, it might be helpful to mention that the above figures relate to rights built
up in the National Insurance Fund in Great Britain, Northern Ireland having separate
arrangements in this regard.
Information requested exempt from release
The information requested is therefore exempt from release under Section 21 of the
Freedom of Information Act (Information available by other means). Section 21 is an
absolute exemption, which means that no consideration of the public interest test is
required to withhold information.
Review process
If you are unhappy with the service you have received in relation to your request and wish to
make a complaint or request a review of our decision, you should write to:
Kevin Down
Director of Finance and Support Operations
Government Actuary’s Department
Finlaison House
15–17 Furnival Street
London EC4A 1AB
If you are not content with the outcome of your complaint, you may apply directly to the
Information Commissioner’s Office (ICO) for a decision. Generally, the ICO cannot make a
decision unless you have exhausted the complaints procedure provided by GAD. The
Information Commissioner can be contacted at:
The Information Commissioner’s Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF
Yours sincerely
George Russell
Deputy Government Actuary
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