In most employment claims that include pension loss, the figure presented to the Tribunal or to the other side in settlement negotiations is computed by a method that is straightforward, defensible-looking, and substantially wrong: the contributions the employer would have made to the claimant’s pension over the loss period. For defined-contribution arrangements this comes close to the right answer in many cases. For defined-benefit arrangements — including the defined-benefit accrual within hybrid schemes, public-sector schemes, and final-salary closed sections — the contributions figure can understate the actual pension loss by a multiple.
Why contributions are not the loss
The principle is straightforward once stated. In a defined-contribution arrangement, the value of the pension benefit accrued during a period is approximately equal to the contributions paid in plus the investment return earned on those contributions. The pension loss for the period is therefore approximately the contributions the employer would have paid, often discounted or grossed-up depending on the question being addressed.
In a defined-benefit arrangement, this equivalence does not hold. The pension benefit is defined by reference to salary and service — a percentage of final salary per year of service, or an accruing flat-rate annual amount, depending on the scheme. The employer’s contributions to the scheme are calibrated to fund the scheme’s long-term liabilities given expected future returns, longevity assumptions, scheme demographics and the scheme’s current funding position. They are not, in general, equal to the value of the benefit being earned by any individual member during any given period.
The gap between the two can be significant. For a member earning final-salary accrual at a young age — where each year of service has decades of inflationary uplift to compound through — the actuarial value of the year’s accrual can be three or four times the contributions paid. For a member close to retirement in a mature scheme where the employer is paying down a deficit, the contributions can include funding for past-service benefits that have nothing to do with the year’s accrual at all. Either way, the contributions figure is not a measure of the pension benefit lost.
What the actuarial methodology actually does
The defensible figure for pension loss in a DB context is the actuarial value of the benefit the claimant would have accrued over the loss period, valued at the date of the loss assessment. The methodology has three steps that bear naming.
First, the projection of the benefit. What pension would the claimant have earned over the period in question, given salary, service, and the scheme’s accrual rules. For a final-salary scheme this requires a view on salary progression; for a CARE scheme it requires accumulation of revalued accrual; for a hybrid scheme it requires both. The projection is calibrated to the claimant’s actual employment trajectory or, where the claim involves career-long loss, to a reasonable estimate of what that trajectory would have been.
Second, the valuation of the benefit. The projected benefit — an annual pension payable from a future retirement age, with whatever increases the scheme rules provide and whatever spouse’s and dependants’ benefits attach — is converted to a present-day capital value. This requires assumption choices on the discount rate, mortality, inflation, and the treatment of contingent benefits. Each of these is a methodological decision the actuary needs to defend.
Third, the adjustments the claim context requires. Pension loss in employment claims is typically valued net of the contributions the claimant would have made, since those contributions would have come out of salary that is also being claimed under loss-of-earnings. Tax treatment of contributions and of pension at retirement may need to be addressed. Where the claimant has obtained alternative employment with pension benefits, those benefits typically reduce the loss figure on a like-for-like basis.
None of this is exotic. It is standard pension actuarial work, applied to a specific claim context. The Tribunal’s task in assessing the figure is much easier when the methodology is laid out in this structure than when it is presented as a single number with limited explanation.
Where the contributions figure goes wrong
Three patterns recur across pension-loss claims that are settled or determined on contribution-based figures.
The first is systematic understatement of DB accrual value for younger and mid-career claimants. The contributions figure for a 35-year-old with 25 years of final-salary accrual ahead understates the value of that accrual by a factor that grows with the time to retirement. Tribunals settle these claims on figures that are routinely 50% to 80% lower than a properly-computed actuarial value.
The second is the misuse of CETV-equivalent figures as a proxy for actuarial loss. Where the claimant has left or would have left the scheme, the CETV is sometimes presented as the figure for what they would have taken with them. CETV calculations follow scheme-specific bases that include funding-level adjustments, market-condition flexors and policy decisions by the trustees that have nothing to do with the actuarial value of the benefit lost. Using a CETV for loss assessment substitutes one body’s methodology choices for the methodology choices the loss assessment actually requires.
The third is silent treatment of public-sector schemes. Public-sector pensions — Teachers, NHS, Civil Service, Local Government — are valued on GAD-published factors that exist for specific statutory purposes (transfer values, pension-on-divorce calculations) and not for employment loss. Reaching for the published factor because it is published is methodologically convenient and substantively wrong; the loss assessment requires actuarial valuation of the specific benefit on assumptions appropriate to the loss question.
Why this matters more than it used to
Two structural pressures have raised the stakes on pension-loss methodology.
The Tribunal’s expectations have hardened. Where the claim value rests substantially on pension loss — common in long-service unfair dismissal, age discrimination, and senior-executive cases — Employment Tribunals have increasingly directed that the figure be supported by actuarial evidence rather than accepted on the contributions basis. Schedules of loss that include substantial pension components without actuarial support are at risk of judicial commentary, costs implications, or directions for further evidence that delay matters substantially.
The settlement market has shifted in parallel. Defendant employers and their insurers have begun routinely commissioning their own actuarial assessments where the pension loss figure on a Schedule of Loss looks high. A claimant’s figure based on contributions alone, set against the defendant’s actuarial counter, places the claimant in a structurally weak position regardless of the substantive merits of the claim. Settlements consequently land at figures lower than the claimant’s actuarial position would have supported.
What independent FCA-regulated analysis adds
Advice on pension compensation amounts is itself a regulated activity under the FCA’s claims-management regime. The firm operates as the first FCA-regulated actuarial firm authorised to provide this regulated service, with FRN 831289 covering the relevant permissions. For employment lawyers, this matters in three ways.
The Expert’s analytical position carries the weight of FCA regulatory accountability behind it. The methodology, the assumption set and the conclusions are produced under the firm’s FCA-authorised quality framework, with the four-document FCA-aligned engagement pack — Invitation Letter, Summary Information Document, General Terms and Conditions, Complaints Handling Procedure — that the regulatory regime requires.
The firm’s engagement is direct and route-flexible. Employment lawyers commission the firm to support the claimant’s case; defendant firms commission the firm to assess a claim; mediators and judges commission the firm to provide independent assessment where parties cannot agree on a figure. The engagement letters are scoped per matter; pricing is fixed-fee for standard cases and time-based where the matter is open-ended.
The deliverable is the actuarial position the lawyer or claimant takes into the next conversation — with the other side, with the Tribunal, with the insurer, with their client. The methodology is disclosed in full, the assumption choices are explained, and the resulting figure is supported by reasoning the recipient can engage with substantively. That is a different position from a Schedule of Loss with a pension figure presented as a round number derived from employer contributions.
Last updated May 2026.