The solution states that the post retirement discount rate would decrease from 2.5% pa to 1.5% pa. This is following the change in investment strategy from pensioner liabilities being backed by long-dated corporate bonds (current market yield of 3% pa) to pensioner liabilities being backed by long-dated index-linked gilts (current market (presumably real?) yield of -2% pa). Why would the post-retirement discount rate reduce by 1% pa when the new backing assets now have a much lower expected return from current market yields? Is it because the examiners are making an estimate of long-term returns on long-dated index-linked gilts, i.e. roughly 1% pa lower than corporates due to reduced default risk, marketability risk etc?
This is really a question for the Examiners and relates to when the exam was specific to the UK. From observation the post-retirement discount rate has been set as the return on long-dated gilts in both valuations. Do note that the return given on long-dated index-linked gilts is the real return and so to determine the assumption for the post-retirement discount rate price inflation needs to be considered. This could be estimated as the difference between the return on conventional and index-linked gilts (as it appears to be here as 3.5% pa is assumed) which would take us back to the return on long-dated gilts (as -2+3.5=1.5% pa) as a reasonable assumption for the post-retirement discount rate.
