The Treasury announced on Tuesday a change to the SCAPE (Superannuation Contributions Adjusted for Past Experience) discount rate from 1.7% a year to 2.0% a year. The SCAPE rate is used to set the basis for calculating the contributions paid to public sector plans, and crucially for divorcing parties, the Cash Equivalent Transfer Values.
We understand that the calculation of all transfer values is suspended for all public-sector plans with immediate effect whilst this change is implemented – we are aware that the Civil Service and Teachers’ pensions administration websites have explicitly confirmed this, and we expect the other Schemes to follow suit.
Civil Service: Member Hub
Teachers’ Pensions: Suspension of calculations relating to pensions on divorce and non-Club transfers | 05 | 2026
The suspension applies to all public-sector pension schemes – including those relating to the NHS, Teachers, Civil Service, Local Government, Armed Forces, Police, Firefighters, UK Atomic Energy Authority and the Judiciary (but there may be others) – and is because the Government Actuary’s Department (GAD) has been instructed by HM Treasury to review the schemes’ actuarial factors.
The implications for ongoing divorce cases depend on whether they involve sharing a public-sector pension and where you are in the process, as explained below.
Background, scope of review and timescales
Each public-sector pension scheme uses a suite of bespoke actuarial factors for calculating CETVs, pension sharing credits, early and/or late retirement pensions and, in certain cases, the lump sum payable in exchange for commuting pension at retirement.
Such factors are based on a set of actuarial assumptions, which comprise both demographic and financial assumptions. The demographic assumptions (e.g. mortality) are typically set by each scheme’s managers, on the advice of GAD. However, importantly, the key financial assumptions, in particular the discount rate, are set centrally by HM Treasury.
HM Treasury reviews the discount rate it requires the public-sector schemes to use from time to time, usually in line with the 4-yearly actuarial valuation cycle. On 18 May 2026, HM Treasury made Directions that require the key discount rate to be increased from 1.7% to 2.0% a year above CPI inflation with effect from 1 April 2026.
The rate had previously been reduced from 2.4% to 1.7% a year above CPI inflation in the Spring of 2023, having been reduced from 2.8% to 2.4% a year above CPI inflation in 2019. So, the latest review has come a year earlier than had been expected based on the timing of recent reviews.
The current review will presumably involve the scheme managers reviewing demographic assumptions as well as adopting the new discount rate. Our experience of previous reviews suggests that it will probably be several weeks, or even a few months, before CETV and other calculations can be resumed. At that point there will be a backlog – which may add to the existing backlogs (e.g. due to McCloud). There is also likely to be a further delay before the revised factors are made available to third parties such as Excalibur Actuaries.
Implications
As a result of the increase in the discount rate, we would expect the CETVs of public-sector pensions to decrease. Pension credit factors can also be expected to decrease. So, although the outcome from sharing a given percentage of a public-sector pension internally will change, the net effect is likely to be small providing the parties have broadly similar ages and their assumed retirement ages are also similar. Where this is not the case, the impact of the change in factors may be significant
A significant difference can also arise where a Local Government pension is shared externally since the CE will be lower.
Cases that are not affected
- The Pension Sharing Order has already been implemented.
- The effective date of the Pensions Sharing Order is before 19 May 2026. GAD’s guidance is not particularly clear in this respect.
- Cases that involve only defined-contribution (DC) pensions and/or private-sector defined-benefit (DB) pensions.
- Even cases that involve one or more public-sector pensions will not be affected if those pensions will not be shared (e.g. because they belong to the party with the smallest total pensions). Although the CETVs of those pensions will change, this does not affect either the projected income from those pensions or our measurement of their fair actuarial value (FAV).
- Settlement will be by way of offsetting only.
Cases where a PSO has already been made, but it is not yet effective.
Implementation will now be based on the revised factors.
Accordingly, implementation will be delayed until the factor review has been completed and GAD has issued new factors to the relevant scheme(s). However, the guidance GAD has previously issued to the schemes says that the calculations should be as at the “Transfer Day”, i.e. the date on which the PSO became effective (normally 28 days after the date of the Order, or the date the divorce became final, if later). So, the implementation of pension sharing should be backdated to the start of the implementation window.
The consequences of the factor review are that:
- If the pension being shared has come into payment by the time that sharing is implemented, the debit member will be required to pay back any overpayment of pension and/or lump sum. That overpayment is likely to be much larger due to the delay.
- The outcome for the credit member may be somewhat different to that anticipated.
Cases where we have issued our report, but a PSO has not yet been made
Generally speaking, you should work on the basis of the report received, but you should be aware of the consequences noted under “Cases where a PSO has already been made, but is not yet effective” above.
It should be appreciated that changes in the terms for the calculation of CETVs and internal pension sharing from any DB pension plan are one of the many variables where changes may occur between our report being prepared and sharing being implemented. Other similar external changes include movements in the market values of DC pensions – see the references in PAG2 to ‘moving target syndrome’ (e.g. in paragraph 2.14 and the Glossary). However, please reach out to your Excalibur Expert if you have any major concerns.
Cases where we have been sent a letter of instruction but have not reported yet
Where we have already provided an expected date for the report (i.e. all requested data has been provided), we will progress our report based on the information already provided and using the latest public-sector factors available. However, we will inform you if we believe the factor review could result in a material difference to the outcome of pension sharing.
Where we have not yet received all the necessary information, we will let you know if we require a CETV based on the new factors.
Cases where you are waiting for public-sector pension CETV(s) before sending us a letter of instruction
Please send the letter of instruction to us without the CETV(s) for the public-sector pension(s). We will let you know if we can work without the CETV(s) and what alternative information may be needed (e.g. benefit statements) or whether the CETV(s) will be required. Excalibur Actuaries may be able to work without quoted CETVs and will do so where appropriate.
Excalibur Actuaries
21 May 2026