SCAPE discount rate change

What is the SCAPE discount rate?

The Superannuation Contributions Adjusted for Past Experience (SCAPE) rate is the discount rate used by unfunded public service pension schemes to place a current value on expected future pension payments. The rate is used as part of the periodic scheme valuation process, which enables the government to set employer contribution rates for the public service pension schemes so that they are adequate to cover the cost of the future benefits the scheme will be responsible for paying. The rate is also used to set actuarial factors for public service pension schemes. These factors are then used to calculate the value of members’ benefits.

In May 2026, the government announced that the SCAPE discount rate would be increased from Consumer Price Index (CPI) + 1.7% to CPI + 2%.

This SCAPE discount rate only applies to ‘unfunded’ pension schemes, such as the police, teachers’ and NHS schemes, as these schemes do not have a fund of assets which is invested and from which benefits are paid. See section 2.3 of the Library briefing Pensions in the UK for further information about funded and unfunded public service pension schemes.

How the SCAPE rate is calculated

The methodology for calculating the SCAPE rate is based on long-term future GDP growth expectations, set by the Office for Budget Responsibility (OBR). The government consulted on this approach in 2021 and agreed that the existing GDP-based methodology best reflected the objectives they set to base the decision on:

• fair reflection of costs
• reflect future risks to government income
• stability

The level of the SCAPE rate is reviewed periodically, in line with the periodic valuations of public service pension schemes. In the 2023 consultation response, the government committed to reviewing the rate every four years, replacing the existing five-year timetable. As mentioned in the written ministerial statement announcing the new SCAPE rate, the current methodology has been used since 2011.

Legal basis for changing the SCAPE rate

The government is required to carry out periodic actuarial valuations of public service pension schemes under section 11 of the Public Service Pensions Act 2013, as amended. These valuations are required so the government can ensure that the contribution rates for each scheme are adequate to cover the cost of the future benefits the scheme will be responsible for paying. These valuations happen every four years.

Subsection 3 of section 11 specifies that the Treasury may direct how these valuations are carried out, including:

• the time period in relation to which a valuation is to be carried out
• the data, methodology and assumptions to be used in a valuation
• the matters to be covered in a valuation.

This year’s directions have been published as The Public Service Pensions (Valuations and Employer Cost Cap) (Amendment) Directions 2026 (PDF) which amend the 2023 directions (which were published for the last 4-year valuation).

How does the change in SCAPE rate affect public service pension benefits?

When SCAPE rates are updated, the Government Actuary’s Department (GAD) is required to update the actuarial factors used in scheme calculations, such as for lump sum commutations and cash equivalent transfer values in cases of divorce. This can impact the value of members’ benefits. There is no requirement for the government to consider the impact on members or to put in place transitional protections when changing the SCAPE rate.

Retiring members of the 1987 Police Pension Scheme and the 1992 Firefighters’ Pension Scheme who wish to commute part of their annual pension to create a tax-free lump sum can expect the value of their lump sum to be reduced by around 5% as a result of the changes. See the following pages for further information:

• West Yorkshire Pension Fund, SCAPE Discount Rate changes FPS
• Police Pay, Police Pension Lump Sum Changes 2026

The Police Federation of England and Wales said that it is taking legal and actuarial advice on the scope of the changes and the Fire Brigades Union has said that it will continue to challenge the government to deliver fair, transparent and properly funded pension arrangements for firefighters.

Government response

In response to a Parliamentary Question on the potential impact of an increase in the SCAPE rate for members of the 1987 Police Pension Scheme, the government said that the scheme regulations require that lump sums are calculated using factors specified by the scheme actuary.

Further information

The Office for Budget Responsibility published an article explaining the fiscal implications of the SCAPE rate changes in November 2023, following the previous SCAPE rate change in March 2023.

The Library briefing Public service pensions – employer contributions (11 April 2019) contains further information on the SCAPE discount rate and how public service pension schemes are funded. The Library also publishes briefings on the Police Pension Scheme (19 February 2026) and the Firefighters’ Pension Scheme (15 August 2013).