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

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Presentation on theme: "TPS Changes – Key Issues and Implementation Timetable Dr Nick Kirby – Principal Officer Pensions October 2013."— Presentation transcript:

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 Overview 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

4 Pay More 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 Salary Band (FTE)Contribution rate 2013-14 Increase compared to April 2012 Up to £14,9996.4%0% £15,000 - £25,9997.0%0.6% £26,000 - £31,9997.9%1.5% £32,000 - £39,9998.8%2.4% £40,000 - £44,9999.2%2.8% £45,000 - £74,99910.1%3.7% £75,000 - £111,99910.6%4.2% Over £112,00011.2%4.8%

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 Transitional protection 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 NPA60 scheme member Age at April 2012 Age when moving to new CA scheme 50Stays in FS scheme 49.558.5 (April 2021) 4957 (April 2020) 48.555.5 (April 2019) 4854 (April 2018) 47.552.5 (April 2017) 4751 (April 2016) 46.549 years 6 months - no 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: 1 st 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 – and young teachers may have to work into their Pensions still part of dispute DSB13 WK Pensions_NTP

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