Presentation on theme: "Changes to the Northern Ireland Teachers Pension Scheme."— Presentation transcript:
Changes to the Northern Ireland Teachers Pension Scheme
NITPS modernisation Drivers for Change Pensions Green Paper and Tax Reform. Cost of increased life expectancy. Increased Minimum Retirement Age 55 & Normal Pension Age 65. Extending Working Lives. Flexibility and retaining experience. Overdue scheme improvements.
Agreed package of reforms – new entrants Provisions for NEW ENTRANTS from 1 April 2007 will include: + Normal Pension Age (NPA) of 65 + Minimum Retirement Age of 55. except on grounds of ill health. + Pension based on 1/60 th of salary for each year of pensionable service with the flexible option to take up to 25% of fund value after commutation as a tax-free lump sum by surrendering £1 of annual pension for £12 of lump sum.
Agreed package of reforms – new entrants (contd) The better of the last years salary or the re- valued (in line with RPI) average of the best three consecutive years salary in the last ten years of service to be used for calculating benefits at retirement. A facility to purchase up to £5,000 of added annual pension. A death grant of three times salary.
Agreed package of reforms – new entrants (contd) Automatic part-time membership. Dependants benefits payable to unmarried partners. Spouses and nominated partners pensions paid for life. Revised ill-health retirement package – tiered approach with a higher level of benefits for total incapacity, lower level for partial incapacity.
Agreed package of reforms – new entrants (contd) Phased retirement arrangements. These would enable NITPS members, under defined circumstances, to continue working as a teacher within the NITPS while drawing down some of their accrued pensions benefits. Actuarial enhancement for those who continue in work beyond NPA 65 without accessing their pension benefits. Actuarial Reduced Benefits.
Agreed package of reforms – new entrants (contd) EXISTING MEMBERS will retain NPA of 60 and the current arrangements will be modified and improved in the following ways: Minimum Retirement Age of 55 by 2010, except on grounds of ill health. Automatic part-time membership – change in contract. Dependants benefits payable to unmarried partners. Spouses and nominated partners pensions paid for life.
Agreed package of reforms – new entrants (contd) The better of the last years salary or the re-valued (in line with the RPI) average of the best three consecutive years salary in the last ten years of service to be used for calculating benefits at retirement. Revised ill-health retirement package – tiered approach with a higher level of benefits for total incapacity, lower level for partial incapacity. More scope to take a higher tax-free lump sum and a lower level of pension. A facility to purchase up to £5,000 of added annual pension.
Agreed package of reforms – new entrants (contd) An increase in the death grant to three times salary. Phased retirement arrangements. These will enable NITPS members, under defined circumstances, to continue working as a teacher within the NITPS while drawing down some of their accrued pension benefits. Actuarial Reduced Benefits.
New entrant? No pensionable service before 1 April Retention of NPA 60 arrangements would be restricted to those who return after a break in pensionable employment of no more than five years. Those who return after a longer break would be subject to a pension age of 65 in respect of their future service. Accrued benefits would still be payable in full from age 60.
New entrant? (contd) Transitional protection for those currently out of service – protection for those who return to teaching by 31 March 2008 regardless of the length of the break in their service. Thereafter the five year limit would apply to any subsequent break in service. There will be a minimum period of scheme membership that must be undertaken after a break in pensionable service.
Normal pension age protection
Automatic part-time Current situation is that part-time members need to elect to join the NITPS. With effect from 1 April 2007, new appointees will automatically be in the NITPS. Existing teachers who start on a new contract after 1 April 2007, will automatically be in the NITPS.
Automatic part-time (contd) Anyone in non pensionable part-time employment on 1 April 2007, will remain in non pensionable employment unless they make a part-time election. Part-time members who do not wish to be in the NITPS will need to opt out, signing a declaration confirming they understand the consequences. No retrospection after 1 April 2007 to achieve existing member status.
Average salary From 1 April 2007, the calculation of pension benefits will be based on the better of the salary in the last year, or the average of the best three consecutive years (re-valued in line with RPI) in the last ten years. Stepping Down arrangements will become obsolete under this approach and will be discontinued from 1 April 2007 (existing elections will be honoured).
Average salary (contd) A 10% cap on any salary increase in each of the last three years of service will be introduced if the last year is the best year. Transitional arrangements will be put in place.
Ill-health benefits From 1 April 2007, there will be a new two tier ill-health retirement provision applying to both existing and new members. - Upper Tier – Total incapacity benefit (TIB): with enhancement of one half of prospective service to a members NPA (60 or 65) - Lower Tier – Partial incapacity benefit (PIB): based on accrued benefits without any enhancement. No actuarial reduction will be applied.
Ill-health benefits (contd) Must be permanently unfit for teaching duties in both cases. The NITPS will take advice from Medical Advisors on a members ability to work. Two tiers of pension may be paid: Upper Tier, for those incapable of teaching and any other gainful employment. Lower Tier, for those permanently incapable of teaching, but capable of a range of other types of work.
Ill-health benefits (contd) Deferred members will qualify for lower tier benefits if they develop a condition preventing them from undertaking any gainful employment. For lower tier, pensioners would be free to undertake any work outside teaching and remain entitled to PIB. Only TIB cases will need to be reviewed if re- employed. Disputes will be handled as currently (appeals process).
Phased retirement Reduced capacity will require a minimum drop in pensionable income of 25% lasting for at least 12 months. You will be allowed to draw down on your pension on two separate occasions up to a maximum of 75% of benefits before retirement. Benefits taken before NPA would be subject to actuarial reduction. No qualifying period will be needed in respect of further service.
Phased retirement (contd) No abatement on pension drawdown where payments have been actuarially reduced. Time periods for elections and finding new post. Benefits from residual service can be taken later as a deferred payment or can be combined with future service.
Added pension From 1 April 2007, it will not be possible to buy additional service in the NITPS either by PAY or CAY. Existing contracts with start dates before 1 April will be honoured. Members will instead be able to elect to pay contributions, which will result in and additional pension in minimum £250 blocks up to a maximum of £5,000 per annum. This additional pension will be subject to PI.
Survivor partner benefits Survivor partner benefits will be available for service from 1 April 2007, in respect of unmarried and unregistered partnerships. Various conditions. The member must: Have lived with the partner for two years Be able to marry or enter a civil partnership Be financial interdependent e.g. share household spending, have joint bank account, etc. Pre 1 April 2007, service can be covered but this must be done within six months of nominating the partner.
Death benefits From 1 April 2007, the death in service lump sum is to increase to three times the new average salary. The accrual rate for survivors benefits will remain at 1/60 th for each year of eligible service, but based on new average salary.
HMRC flexibilities The current 15% contribution limit to be lifted. The 40 year limit on pensionable service to be lifted. The age 65 limit on NITPS membership to be raised to 75.
Contribution rates - members Members The member contribution rate will rise from 6% to 6.4%. The effect of combining the scheme reforms and improvement with retention of NPA 60 for existing members, will require an increase of 0.2% in the contribution rate for all members. A further increase of 0.2% will be applied as the members share of the outcome of the 2004 NITPS valuation.
Contribution rates – employers Employers The employer contribution rate will fall from 14.15% to 13.6% +There will be a ceiling on the employer contribution rate that would take effect from the 2008 valuation onwards. +There will be an equal division between members and employers of any cost increases or saving that may result from future valuations.
New member fact sheets There will be a number of fact sheets on: NITPS Members Guide Planning for retirement Leaving pensionable employment Returning to work after receiving pension benefits Additional Pension Increasing your pension benefits Ill-health benefits
New member fact sheets (Cont) Ill-health retirement benefits and re- employment Working part-time before retirement Average salary Partner benefits Death benefits from 1 April 2007 Maternity/paternity Pensions on divorce Deferred members at 31 March 2007