Pensions - Articles - SPP backs 3.25% GMP rate but says end routine consultations

The SPP says the Government Actuary’s Department (GAD) analysis provides a sound basis for the proposed rate, reflecting medium-term expectations for inflation and earnings growth, but goes on to state that future rates should be determined by GAD and published directly, rather than being subject to a formal consultation every review cycle.

 

The SPP says early confirmation of the rate is essential to avoid costly manual workarounds and urgent changes to administration systems. It believes the rate could be confirmed as early as September, rather than following an eight-week consultation and subsequent consideration of responses.

 

The SPP stresses that most consultation on pensions policy remains valuable because industry expertise can identify unintended consequences or improve policy implementation but in keeping with a recent government missive to reduce consultation, it believes that a different approach is appropriate for routine technical recalculations such as the GMP fixed-rate revaluation.

 

Jo Fellowes, Chair of the SPP Administration Committee said: “We support the proposed continuation of the 3.25% interest rate, but the issue now is with the process. When a rate is driven by established actuarial calculations and economic projections, consulting on the same exercise every time adds little value.

 

The industry needs certainty, not another round of paperwork. A straightforward statutory mechanism for GAD to determine and publish the rate would cut unnecessary administration and, crucially, allow schemes and administrators more time so they can make preparations well in advance.”