Budget 2011: Discount rate for public service pension contributions to be set at 3%

Chancellor George Osborne has announced that the discount rate for calculating public sector pension contributions will be set at 3% above the consumer price index (CPI).

The Budget report stated that the discount rate for calculating unfunded public service pension contribution rates should be based on the long-term expectation of gross domestic product (GDP) growth.

This is designed to ensure that employment decisions made today take into account the costs passed to future taxpayers on a "fair and sustainable basis".

The latest forecast for long-term GDP growth is 2.2% above the assumed GDP deflator, equivalent to a discount rate of 2.9% above the CPI.

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