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TPS Changes – Key Issues and Implementation Timetable

TPS Changes – Key Issues and Implementation Timetable. Dr Nick Kirby – Principal Officer Pensions October 2013. Purpose of Session. To ensure that Division Secretaries: Are fully aware of planned 2015 changes

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TPS Changes – Key Issues and Implementation Timetable

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  1. TPS Changes – Key Issues and Implementation Timetable Dr Nick Kirby – Principal Officer Pensions October 2013

  2. Purpose of Session To ensure that Division Secretaries: • Are fully aware of planned 2015 changes • Know that contribution increases mean actual pay cuts - not just real terms pay cuts • Are fully armed to use pensions to motivate members to support the action

  3. TPS pre and post 2007 Final salary Contribution rate = 6.4% Normal Pension Age (NPA) = 60 (pre 2007 members) 65 (post 2007 members) Accrual rate = 1/80 (pre 2007 members) 1/60 (post 2007 members) Revaluation rate = based on final salary 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 Overview

  4. 50% contribution rise, from 6.4% to an average 9.6% by 2014 Average teacher contribution 8.96% from April 2013 Further increase planned in April 2014 Pay More

  5. Work Longer • Scheme pension age to be linked to State pension age • Based on age as at April 2012 • Work till 68 for a full pension if 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?

  6. Get Less • Career average means less for vast majority of teachers • Accrual rate of 1/57 of average salary per year but • Reduced actuarial reduction factors for those with NPA above 65 • Lower ‘revaluation rate’ means pension will lose ground against average earnings before retirement • CPI inflation link during retirement takes over £30,000 from teachers with £10,000 pension

  7. Teachers within 10 years of NPA on 1 April 2012 stay on 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 Transitional protection

  8. Operation of career average scheme • Teachers build up an amount of CA pension each year – then indexed to retirement • CA pension based on service and pay – every payslip counts! • Fragmentation of education system risks lower administration standards • Vital that members check and correct service and salary records

  9. Mixed Service • Post 2015 most teachers will have FS pension and CA pension • Final salary based on salary when exit teaching, not salary in 2015 • Teachers can take FS pension in full at current NPA (but must end contract)

  10. Do teachers have to take FS and CA pensions at the same time? • If a teacher takes FS pension at (or beyond) FS NPA – can leave CA rights • If teacher takes FS pension before FS NPA (ie as an actuarially reduced pension) – teacher must also take CA pension rights

  11. Abatement • Abatement will not apply to career average service • But career average service will count in working out whether final salary pension is abated • Abatement will only fully drop out of system once last member with final salary service retires

  12. Ill Health • Ill Health enhancements unchanged – still PIB and TIB • Pension (+ any enhancement) will be based on member’s final salary • Exception = if member steps down due to ill health and subsequently retires – pension based on indexed salary pre-stepping down (or final salary if higher)

  13. Ill Health (2) • Currently, TIB only possible if application made within 6 months of leaving pensionable employment (or within agreed sick leave period) • DfE planning to change ‘in service’ rule to applications made within 2 years of ceasing to receive pensionable pay (or within agreed sick leave period)

  14. Dependents’ benefits • Death grant rules similar - proposal = 3x FTE salary at date of death • Dependents’ pensions accrual unaltered apart from move to career average • Surviving adult’s pension builds up at 1/160 of career average salary • Children’s pensions unaltered • Proposal to alter service enhancement for in-service deaths to TIB rules (i.e. ½ prospective service to normal pension age)

  15. Other parts of Proposed Final Agreement • CPI-link for deferred rights and pensions in payment • Members who leave and return within 5 years will have accrued service in current (NPA 60/65) scheme linked to final salary at retirement • Phased retirement: option of 3rd phase after member’s 60th birthday • Public sector transfer club remains

  16. Implementation Timetable • Sept-Nov 2013: Formal Consultation on draft Regulations • January 2014: Draft 2012 Valuation Report • April 2014: Regulations to implement CA scheme become law • April 2015: Implementation of CA Scheme • April 2019: 1st valuation and review of contributions under new system

  17. Messages to take back • Contribution rises since April 2012 and planned 0.64% rise in April 2014 outweigh Sept 2013 1% pay rise • Career Average means members must keep every payslip until retirement • 68 is too late www.68istoolate.org.uk/ – and young teachers may have to work into their 70s • Pensions still part of dispute DSB13 WK Pensions_NTP

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