Although I don't believe that we should be using discount rates at all for long-term financial entities, using allegedly “prudent” discount rates has led to a hugely severe DB economic impact. From the adjustments chart, it is reasonable to conclude that there is no way that we could even have guessed in advance by how much the discount rate would have failed to lead to a satisfactory outcome. The contracts I have considered are relatively simple, so the outcome can hardly be assumed to be better for complex DB pension schemes.

Before being suspended, the ONS "MQ5" series provided some really useful data and has recently been replaced by their Financial Survey of Pension Schemes. Over 15 years [Q2 2009 to Q3 2024, 2 quarters missing], I've looked at UK private sector employers’ DB pension contributions. The total paid was 436.3 b (sterling) of which special contributions accounted for 197.1 b (82.4% of normal).

Suppose that the discount rate was under-estimated by 1.5 % pa, a very conservative estimate. Indeed, one can easily reach 1.0 % pa from inflation alone. That implies at least a 30% difference in capital value so at least 131 b (private sector alone) was misallocated in UK. Could the heavy financial burden be a partial explanation for low UK productivity over that period? While all UK Governments claim to want to deliver growth, over-charging sponsors can’t have been helpful and nor have the October 2024 employment tax increases (nor will the forthcoming employment protection policies being implemented).

Yes, 131 b is my personal estimate but you can choose your own yield adjustment and come to your own conclusions.