Teachers Pension Scheme Rep Powerpoint June 2018 Overview

Teachers’ Pension Scheme – Rep Powerpoint June 2018

Overview • • TPS pre and post 2007 Final salary Contribution rate = 6. 4% (pre April 2012) Normal Pension Age (NPA) = 60 (pre 2007 members) 65 (post 2007 members) Accrual rate = 1/80 (pre 2007 members) 1/60 (post 2007 members) TPS 2015 • Career average (CA) • Contribution rate = average 9. 6% • Normal Pension Age (NPA) = Equal to State Pension age (65 to 68 depending on age) • Accrual rate = 1/57 • Revaluation rate = CPI + 1. 6% • Special early retirement reduction factors

Contribution rates • Average employee contribution rate = 9. 6 per cent (up from 6. 4 per cent pre-April 2012) Salary Band • Contributions based on actual salary, not FTE salary Contribution Rate £ 0 - £ 27, 047 7. 4% £ 27, 048 - £ 36, 410 8. 6% £ 36, 411 - £ 43, 171 9. 6% £ 43, 172 - £ 57, 216 10. 2% £ 57, 217 - £ 78, 022 11. 3% £ 78, 023+ 11. 7%

Pension age • Career average scheme normal pension age linked to state pension age • Based on age as at 1 April 2012 – Work till 68 for a full pension if aged 34 or under – Work till 67 if aged 35 to 50 – Work till 66 if aged 51 to 58 • Transitional protection if within 10 years of current scheme pension age (see later) • Pension age may be even higher in future = 70+ for youngest teachers

CA scheme less generous • Career average means less for vast majority of teachers • Accrual rate of 1/57 of average salary per year but • Lower ‘revaluation rate’ means pension will lose ground against average earnings before retirement • Reduced actuarial reduction factors of 3 per cent for those with NPA above 65 (for gap between 65 and NPA) • CPI inflation link during retirement takes over £ 30, 000 from teachers with £ 10, 000 pension

Pension Build Up • Each year members ‘bank’ 1/57 of pensionable earnings • The amount banked is increased each year until retirement. At retirement all separate years add together to form total pension • In-service members have their pension rights revalued each April with CPI inflation + 1. 6 per cent • Out of service teachers have their pension rights revalued annually by CPI only • If member leaves service and returns within five years then treated as in-service for whole period • No automatic tax-free lump sum.

When will I be switched to career average? • Teachers within 10 years of NPA on 1 April 2012 stay on their existing FS scheme • Teachers up to further 3. 5 years away have tapered protection. Each month younger than full protection cut -off, they lose 2 months of protection FS NPA 60 Scheme Member Age at April 2012 Age when moving to CA Scheme 50 Stays in FS Scheme 49 years 6 months 58. 5 (1 April 2021) 49 years 57 (1 April 2020) 48 years 6 months 55. 5 (1 April 2019) 48 years In CA from 1 April 2018 47 years 6 months In CA from 1 April 2017 • Everyone else switched into career average on 1 April 2015 • New entrants put in career average scheme 47 years In CA from 1 April 2016 46 years 6 months, 1 day In CA from 1 June 2015 46 years 6 months In CA from 1 April 2015

Interaction between FS and CA pension rights • Post 2015 most teachers will have FS pension and CA pension • Final salary based on salary when exit teaching, not salary in 2015 • Members can take FS pension in full at current NPA (but must end contract (or opt out of scheme)) • If a member takes FS pension at (or beyond) FS NPA – can take or leave CA rights • If member takes FS pension before FS NPA (ie as an actuarially reduced pension) – member must also take CA pension rights

Operation of career average scheme • CA pension based on pay – every payslip counts! • Fragmentation of education system risks lower administration standards • Vital that members frequently check and correct records. Records assumed to be correct unless evidence to contrary • Members should keep payslips, P 60 s and TPS pension statements • Members need to sign up with TPS’s ‘My. Pension. Online’ service to get pension statements

Other pension costs increased • Employer contribution 16. 4 per cent from September 2015 (previously 14. 1 per cent) • Employee NICs increased 1. 4 per cent from April 2016 • Abolition of ‘contracting out’ in April 2016 - 3. 4 per cent increase in Employer NICs • These changes are having a knock-on effect on pay and jobs

Conclusion • 3. 2 per cent employee contribution rise not linked to pension scheme funding • 68 is too late – and young teachers may have to work into their 70 s • Cuts happening due to employer NIC increases and increases in employer pension contributions