Steve Webb is ok, he knows what he's talking about.
I've always suggested that the tweaks around the edges of AFPS 15 are red herrings, that it is only going to be affordable or viable as long as the Discount Rate (DR) stays within set parameters. The White Paper declared that new public sector schemes (ie; AFPS15) would be subject to change or modification if the cost cap was breached. And that's linked to the DR. If costs move below or above the cap, scheme benefits may be amended to alter the overall cost of the scheme or the level of member contributions may be altered.
AFPS is an unfunded scheme which means the money is found behind the Treasury sofa on a rolling yearly basis. Some funded DB/FS schemes though, need to look at reducing the shortfall in other ways if the DR falls and the cap is breached. The Civil Service scheme is a funded pension scheme and it looks like it has declared a cut in its DR and a breach of cost cap. The cost cap for the CS scheme was set at 18.5% and had a margin of +/- 2%.
It has crept up to 21.1% which means the money has to be found from somewhere other than the government. The solution? Well, it looks like members have got to put more money into their notional pots by increasing contributions. Hands up if you've ever had an endowment red warning letter, suggesting your shortfall may be addressed, everything will be fine and you won't lose money.. if you increase your contributions. AFPS DR has yet to be declared (as far as I am aware). When it does and if the cap is breached, what then happens?
Finally, and in more good news, when I am 100, 18.3% of GDP will be spent on healthcare and wiping chicken soup from my and my cohorts slobbering jowls and when I'm 70, 33% of us (you?!) will be paying higher rate tax. The tax tail should never wag the investment dog but be aware of as many tax breaks that you can grab and think long term. If you are going to be a HR tax payer for the rest of your days, what can you do now to mitigate tax liability?
http://resources.civilservice.gov.uk...l-22072014.pdf