Member

There is, therefore, a direct and immediate link between these secondary rates and additional costs borne by the taxpayer. What we are witnessing here is an extreme escalation of contribution prudence. Liabilities are now being valued on the assumption that there will be no reliance whatever on investment outperformance, while at the same time the fund continues to invest in equities and other growth assets—an implicit acknowledgement that returns above gilts are in fact expected. Even when surpluses are calculated on this ultra-conservative basis, employers are still required to pay to repair a deficit that does not exist. That creates a fundamental inconsistency at the heart of the system: the investment strategy assumes growth, while the contribution policy assumes none.