EPN698: Employer contribution rates and administration charges
EPN698: Employer contribution rates and administration charges
Audience
This notice will be of interest to:
Pension leads
Payroll managers
Finance managers
HR managers
Summary
This EPN provides important information on the changes in the employer contribution rates and administration charge from 1 April 2024. These rates have been calculated based on the latest actuarial valuation.
Actions
To instruct your payroll provider to amend contribution rates as noted in this EPN
To inform colleagues (as per the audience outlined above) of the change in rates
Timing
Informing payroll providers and colleagues: as soon as possible
New rates apply from: 1 April 2024
Detail
A valuation of the scheme is undertaken every four years and provides the information required to set employer contribution rates. The 2020 valuation report has now been published and is available here.
Generally changes resulting from a valuation are implemented three years after the valuation date however additional time was provided to public service pension scheme schemes to complete the 2020 valuation process in light of the impact of the McCloud remedy process. The date for implementing changes to employer contribution rates was therefore delayed from April 2023 to April 2024.
Following the transition of all active members to alpha on 1st April 2022 it has been agreed that the previous salary-based structure is no longer appropriate. A flat rate employer contribution will therefore be introduced.
In preparation for the valuation, HM Treasury announced that the discount rate used for determining the cost of future pension payments (known as “SCAPE”) would be reduced from 2.4% to 1.7%. As a result the cost of providing benefits has increased and the average employer contribution rate will increase to 28.7% (excluding admin levy). Please see the funding section for details of additional funding, which is being made available by HM Treasury.
Previously the contribution rate included an administration levy of 0.32%. However, due to a planned reduction in administration costs the levy will be reduced to 0.27%.
Rates including administration levy:
Band
Current (1 April 2019 to 31 March 2024)
Revised (1 April 2024 to 31 March 2027)
Band 1 (£23,000 and under)
26.6%
28.97%
Band 2 (£23,001 to £45,500)
27.1%
28.97%
Band 3 (£45,501 to £77,000)
27.9%
28.97%
Band 4 (£77,001+)
30.3%
28.97%
Funding
On 30th March 2023 the Chief Secretary to the Treasury issued a Written Ministerial Statement to confirm the new SCAPE rate and a commitment to providing funding for increases in employer contribution rates for employers whose employment costs are centrally funded through departmental expenditure.
Departments should contact their HM Treasury spending team to confirm the funding arrangements.
New Fair Deal employers should contact their contracting authority and other organisations such as non-departmental public bodies should contact their sponsoring department to confirm whether additional funding is available.
Partnership
There are no changes to the Partnership pension employer rates at this time and the mini-ASLC will remain at 0.5%. A review of Partnership rates will be undertaken and a further EPN will be issued should changes be appropriate.
Member Contributions
The valuation report confirms the cost control mechanism has been undertaken and there is no requirement for the Minister for the Civil Service to consult on any changes to the scheme. As a result the current member contribution rates will remain as published.
The current scheme rules provide that the lowest contribution salary threshold of £32,001 will increase by CPI in April 2024. The September CPI rate is expected to be published by the ONS in mid-October 2023 and we will confirm the updated threshold as soon as possible after publication.
Contacts
If you have a question about the distribution of EPNs or would like to receive them in a different format, please email; EPN@MyCSP.co.uk
You can find electronic copies of the Employer Pension Guide, all current EPNs and forms in the Employer section of the Civil Service Pensions website at www.civilservicepensionscheme.org.uk
This notice is for employers only and should not be issued to scheme members.
