Briefing – Pension Changes Short Guide April 2015 February 2015

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

Pay More Average employee contribution rate = 9.6 per cent (up from 6.4 per cent pre-April 2012) Contributions based on actual salary, not FTE salary Salary Band Contribution Rate £0 - £25,999 7.4% £26,000 - £34,999 8.6% £35,000 - £41,499 9.6% £41,500 - £54,999 10.2% £55,000 - £74,999 11.3% £75,000+ 11.7%

Work Longer Scheme normal pension age to be linked to state pension age Based on age as at 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

Get Less 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 Overtime included in definition of pensionable earnings

When will I be switched to career average? 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 Everyone else switched into career average on 1 April 2015 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 54 (1 April 2018) 47 years 6 months 52.5 (1 April 2017) 47 years 51 (1 April 2016) 46 years 6 months, 1 day 49 years 8 months (1 June 2015) 46 years 6 months 49 years 6 months (no protection)

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, P60s and TPS pension statements

More pain ahead Employer contribution currently 14.1 per cent, will rise to 16.4 per cent from September 2015 1.4 per cent increase in Employee NICs from April 2016 Abolition of ‘contracting out in April 2016 - 3.4 per cent increase in Employer NICs These changes will have a knock-on effect

Conclusion NUT still in dispute over pensions 3.2 per cent contribution rises since April 2012 outweigh 2013 & 2014 1 per cent pay rises 68 is too late www.68istoolate.org.uk/ – and young teachers may have to work into their 70s Cuts a real possibility due to employer NIC increases and increases in employer pension contributions Support the NUT’s ‘Stand Up For Education’ campaign