The focus of the NAPF’s response is on the four options set out in Chapter 3 of the consultation paper, setting out general principles for assessing the four options.  We do however conclude that the use of a discount rate based on the yield on index-linked gilts would be incorrect as it would lead to an excessively volatile contribution rate.  This does not reflect the economic reality of the public sector’s pensions liability, which – like that for the private sector – changes only slowly over time in line with scheme demographics.  Nor would it be seen as in any way credible by contributors, thus undermining the Government’s intention that contribution rates should provide an indication of the value of the public service pensions to its employees.

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