1. NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme 2015 Change Overview
January 2015

2. NI Teachers’ Pension Scheme
Objectives

3. NI Teachers’ Pension Scheme
Today’s aim is to provide an awareness of the changes to the scheme and how those affect you.
Objectives :
Background
Overview of the reformed NITPS
Awareness of who will join the career average arrangements
Information on when you can retire
Awareness of how career average will work

4. NI Teachers’ Pension Scheme
Scheme Flexibilities
Options for Additional Pension
Information on how the benefits are different from now
Summary of Changes
Benefits of the NITPS
Further Information

5. NI Teachers’ Pension Scheme
Background

6. NI Teachers’ Pension Scheme
The pension landscape for public service pensions has changed dramatically over the past decade.
In 2007 the NI Teachers Pension Scheme (NITPS) was reformed resulting in the normal pension age for new entrants increasing to 65 from

7. NI Teachers’ Pension Scheme
2010 – Independent Public Service Pensions Commission (IPSPC) chaired by Lord Hutton.
October interim report published.
Increased member contribution rates were recommended as an appropriate means to make short term savings in the cost of public service pension provision.
10 March final report published.
Further recommendations for long term structural reform of public service pension schemes, mainly the introduction of Career Average Schemes and an increase in Normal Pension Age to State Pension Age.

8. NI Teachers’ Pension Scheme
Between April 2012 and April 2014 there have been annual increases in member contribution rates.
Members now pay an average of 9.6% of Salary.
March the Public Service Pensions Act (NI) 2014
Closes existing public service schemes, including the NITPS and sets the parameters within which the public sector pension schemes must operate going forward from April 2015.
12 December 2014 – The Teachers Pensions Regulations (NI) 2014 established the reformed NITPS.

9. NI Teachers’ Pension Scheme
Overview Of The Reformed NITPS

10. NI Teachers’ Pension Scheme
The main features of the new scheme are:
A pension design based on career average earnings instead of final salary.
An accrual rate of 1/57th; of pensionable earnings each year.
Normal Pension Age (NPA) equal to State Pension Age (SPA), which applies both to active members and deferred members (new scheme service only). If a member’s SPA rises, then NPA will do so too for all post-2015 service.

11. NI Teachers’ Pension Scheme
Revaluation of active members’ benefits in line with consumer prices index (CPI ) +1.6%.
Pension in payment to increase in line with Prices Index (currently CPI).
Benefits earned in deferment to increase in line with CPI
Average member contributions of 9.6% with some protection for the lowest paid.
Optional lump sum commutation at a rate of 12:1, in accordance with HMRC limits and regulations.
These are the key aims from DWP

12. NI Teachers’ Pension Scheme
Spouses/partner pension in accordance with current provisions.
Lump-sum on death in service of 3 times full time equivalent (FTE) salary.
ill-health benefits the same as those in the current open scheme.
Actuarially fair early/late retirement factors on a cost neutral basis except for those with a NPA above age 65, who will have early retirement factors of 3% per year for a maximum of 3 years in respect of the period from age 65 to their NPA.
These are the key aims from DWP

13. NI Teachers’ Pension Scheme
An employer cost cap to provide back stop protection to the taxpayer against unforeseen costs and risks.
Public sector transfer club will continue.
Phased retirement arrangements which reflect those in the current scheme, with the additional option of a third drawdown of benefits after a member’s 60th birthday.
Abatement will not apply to service in the reformed NITPS. Abatement rules for the current scheme will remain unchanged.
These are the key aims from DWP

14. NI Teachers’ Pension Scheme
Members who leave the scheme and return within 5 years will have their accrued service in the current (NPA 60/65) scheme linked to their final salary at retirement.
Flexibilities to allow members to elect to pay a higher contribution rate in return for a higher accrual rate for a particular year, at full member cost, within existing limits on additional pension
These are the key aims from DWP

15. NI Teachers’ Pension Scheme
Members who in the new scheme have a NPA higher than 65 will have an option in the new scheme to pay additional contributors to reduce or, in some cases, remove any early retirement reduction that would apply, if they retire before their normal pension age.
Only reductions that would apply in respect of years after age 65 can be bought out and the maximum reduction that can be bought out is for 3 years (that would apply to a member with a Normal Pension Age of 68 or higher).
These are the key aims from DWP

16. NI Teachers’ Pension Scheme
Awareness Of Who Will Join The Career Average Arrangements

17. NI Teachers’ Pension Scheme
Not all members will move into the career average arrangements.
Members who meet certain criteria will remain in the existing final salary arrangements.

18. NI Teachers’ Pension Scheme
Fully Protected Members
Active members in the NITPS NPA 60 or NPA 65 schemes on 31 March 2012, and were within 10 years of their normal pension age on 1 April 2012 will remain in their final salary arrangements. These members are fully protected.
Remain in Final Salary Arrangements

19. NI Teachers’ Pension Scheme
Tapered Protection Members
Active members in the NITPS NPA 60 or NPA 65 schemes on 31 March 2012 who were between 10 and 13.5 years of their normal pension age on 1 April 2012 are tapered protection members.
A transition date to move to the career average scheme
Pension based on final salary and career average

20. NI Teachers’ Pension Scheme
Availability of Full and Tapered Protection
‘Full and Tapered protection’ is only available as long as a member does not have a continuous break of more than five years or does not take their pension benefits (other than phased benefits).

21. NI Teachers’ Pension Scheme
Transitional Members
Transitional members are current members who move to the career average scheme on 1st April 2015.
Move to career average scheme on 1 April 2015
Pension based on final salary and career average

22. NI Teachers’ Pension Scheme
New Entrants
New members who enter the NITPS scheme on or after 1 April 2015 will join the career average scheme.
Pension based on career average

23. NI Teachers’ Pension Scheme
Information On When You Can Retire

24. NI Teachers’ Pension Scheme
When A Member Can Retire
If a member is ‘fully protected’ and has had no breaks in service of more than 5 years they will have remained in the final salary NPA 60 or NPA 65 schemes and will be able to take their retirement benefits at their final salary NPA without an actuarial reduction.
Otherwise their retirement benefits will be actuarially reduced by 5% per year before their normal pension age.
NPA in the career average arrangement is equal to state pension age.

25. NI Teachers’ Pension Scheme
A member with tapered/partial protection or an active member with ‘transitional protection’ must claim both final salary and career average benefits at the same time.
Where the member is out-of-service final salary benefits can be taken without career average benefits when a member reaches their NPA in their existing final salary arrangements. The member will be able to claim their benefits from final salary, without having to claim their benefits from the career average arrangements.

26. NI Teachers’ Pension Scheme
If a member is out of service and wishes to claim all their benefits at their final salary NPA.
Career average benefits will be actuarially reduced (5% per year before age 65 and 3% per year to their career average NPA – maximum period of 3 years).

27. NI Teachers’ Pension Scheme
Awareness Of How Career Average Will Work

28. NI Teachers’ Pension Scheme
How an active member’s pension builds up in career average (no breaks in service)

29. NI Teachers’ Pension Scheme
How a member’s pension builds up in career average with a break of no more than 5 years service

30. NI Teachers’ Pension Scheme
How a member’s pension builds up in career average with a break of more than 5 years in service

31. NI Teachers’ Pension Scheme
Scheme Flexibilities

32. NI Teachers’ Pension Scheme
Who can access flexibilities?
Flexibilities are only available to career average members.
Tapered members will only be able to access career average flexibilities once their protected period has expired and they have joined the career average scheme.

33. NI Teachers’ Pension Scheme
What is faster accrual?
A member can elect to pay higher contributions in career average, to earn a higher pension.
The normal rate of accrual or growth in pension is based on 1/57th of their actual earning for that year.
Member can pay higher contributions so that growth in their pension can be 1/45th, 1/50th and 1/55th of their actual earnings for that year.

34. NI Teachers’ Pension Scheme
When does a faster accrual election start and end?
Each election lasts for one financial year (1 April to 31 March). An election must be made in the year before the member wants it to take effect. This would ideally be before the end of January to allow the Department and employer to process the election before 1 April.
If a member enters teaching mid-year they can make an election for the remainder of that year, but the member must make it within one month of entering service.

35. NI Teachers’ Pension Scheme
What is actuarial buy-out?
Members in career average can pay additional contributions, which allows them to retire from 65 but before their normal pension age (NPA) without their benefits being actuarially reduced.
Members can purchase 1, 2 or 3 years buy-out dependent on their NPA. Contributions are paid throughout their career unless they leave service for 30 days or more, when the election is deemed to be cancelled.

36. NI Teachers’ Pension Scheme
For member’s to avail of actuarial buy-out flexibility, members must make an election within 6 months of entering the career average scheme as this flexibility is only available when the member joins the career average scheme.

37. NI Teachers’ Pension Scheme
What happens if a member has more than one employer and chooses to make a flexibilities election?
If a member has more than one employer, they are required to notify the Department and employer that they wish to make the deduction. If a member makers a faster accrual election they can choose to have different rates of deduction from each employer, provided they do not exceed their overall flexibilities limit.
However, if a member elects for the actuarial buy-out flexibility, then it applies to all their employments.

38. NI Teachers’ Pension Scheme
Options For Additional Pension

39. NI Teachers’ Pension Scheme
Additional Pension
As with the current arrangements, members can still purchase additional pension.
Purchased in amounts of £250.
Payment can be monthly or in a lump sum.
Additional Voluntary Contributions (AVC’s)
As with the current arrangements, members can also pay additional contributions into the Scheme’s AVC provision with Prudential.

40. NI Teachers’ Pension Scheme
Information On How The Benefits Are Different From Now

41. NI Teachers’ Pension Scheme
Contribution rates for the NITPS
Member’s monthly contributions are based on their actual salary.
From 1 April 2015 the contribution rates for the NITPS are changing to the table shown below:
Actual annual pensionable earnings
Member Contribution Rate
Up to £25,999
7.4%
£26,000 to £34,999
8.6%
£35,000 to £41,499
9.6%
£41,500 to £54,999
10.2%
£55,000 to £74,999
11.3%
£75,000 and above
11.7%

42. NI Teachers’ Pension Scheme
Club Transfers
Club arrangements will continue – detail of the new arrangements still to be finalised and published by the Cabinet Office
12 month time limit will apply.
need to exercise transfer before a break of more than 5 years service between public sector schemes .
Existing arrangements for transfer of comparable teaching service in the existing Final Salary Schemes (England & Wales, Scotland and Isle of Man) will no-longer apply
to facilitate current members a grace period is currently in place (two years up to 31 March 2017) for members to make comparable benefit transfers.

43. NI Teachers’ Pension Scheme
Breaks in service
Members’ final salary benefits will continue to be calculated using the final salary arrangements.
If a member has a break of 5 years or more this can impact on their benefits and the amount they receive when they retire.
If member is fully protected, tapered or a transitional member and have a continuous break of 5 years or more and return to employment, they will join the career average scheme.
In addition the link to final salary will not be maintained and final salary will be calculated using the salary when the break in service commenced to calculate your final salary benefits.

44. NI Teachers’ Pension Scheme
ill-health in the career average arrangements
As with the current arrangements, if a member becomes unfit to teach they can apply for an ill-health retirement pension.
There are two levels of ill-health benefits:
A member is permanently unable to teach but they are able to undertake other employment; or
A member is permanently unable to teach and unable to undertaken any other types of employment.

45. NI Teachers’ Pension Scheme
Time limits for applying for ill-health arrangements
If the member applies for ill-health retirement within 2 years of leaving pensionable employment and there is evidence that they left on medical grounds which are the same reasons for their application, they will be treated as though they were still in service at the point of making an application.

46. NI Teachers’ Pension Scheme
Normal Pension Age(NPA)
Members’ NPA in the career average scheme will be equal to their state pension age or 65 which ever is higher.
NI Pensions Bill is currently progressing through the Assembly
Increase the state pension age from 66 to 67 between 2026 and 2028
Previous provision will increase state pension age from 67 to 68 between 2044 and 2046
There is no change to a members’ NPA for a member who remains in the final salary arrangements (NPA 60 and NPA 65)

47. NI Teachers’ Pension Scheme
Phased Retirement
As with the current arrangements members can take two phased retirements from age 55 but in the career average arrangements members are able to take 3 phased retirements.
Only two phased retirements can be taken before aged 60 in the career average arrangements.
Maximum amount must not exceed 75% of a member’s benefits

48. NI Teachers’ Pension Scheme
Death Grant
In line with the current arrangements there is no qualification period for the death grant.
The NITPS provides for different levels of death grant to be paid depending on whether the scheme member is active, deferred or a pensioner.
Scheme members status at time of death
Lump Sum (Death Grant)
active
Career average: 3 x full-time equivalent salary.
Fully Protected: 3 x final average salary.
Tapered Protection: in final salary 3 x final average salary otherwise 3 x full-time equivalent salary.
deferred
2.25 x scheme members’ accrued pension.
pensioner
5 years worth of pension less amount paid to the scheme member to date – where member dies within 5 years of drawing their pension.

49. NI Teachers’ Pension Scheme
Summary Of Changes

50. NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme Design
Final Salary (up to 31//03/2007)
Final Salary (01/04/2007 – 31/03/2015)
Career Average (Post 31/03/2015)
Normal Pension Age (NPA) 60 65
NPA equals State Pension Age or 65 what ever is higher
Accrual Rate (the formula or rate of “accrual” which is based on service and/or salary to work out your pension benefits)
1/80th pension plus automatic lump sum
1/60th pension
1/57th pension which is increased each year the member is in service by Consumer Prices Index (CPI) plus 1.6%.
If a member is deferred (out of service) the increase is by CPI only.
Note: for CPI only to be applied the member has to be deferred for 5 years or more.
Pensionable pay used in calculation of benefits
Final pensionable salary
Pensionable earnings for each year and now includes overtime
(Average pensionable salary).
Flexibilities
Additional pension from 1 January 2007;
Past Added Years (PAY);
Contributions based on a former higher salary; and
Combined contributions.
Additional Pension
Additional Pension;
Faster accrual; and
Buy out of actuarial reduction.

51. NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme Design
Final Salary (up to 31//03/2007)
Final Salary (01/04/2007 – 31/03/2015)
Career Average (Post 31/03/2015)
Lump Sum
Automatic lump sum
= 3 x pension
Can also convert part of pension to receive an o.ptional lump sum
No automatic lump sum.
Member has the option to convert part of their pension to receive an optional lump sum.
Currently £1 of pension surrendered equates to £12 lump sum.
Death Grant (one off payment where a member dies before becoming entitled to their pension)
3 x final average salary (Active member)
3 x final salary at date of death (Active member)
Phased Retirement
From 1 January 2007 the opportunity to take 2 phased retirements before final retirement.
Opportunity to take 2 phased retirements before final retirement.
Opportunity to take 3 phased retirements (2 before aged 60) before final retirement.
Actuarial Adjustment (where benefits are taken before a members NPA)
Benefits actuarially adjusted by 5% for each year they are taken early.
Benefits actuarially adjusted by 5% for each year they are taken early (where benefits are taken before a members 65 birthday), thereafter adjusted to 3% for a maximum of 3 years.

52. NI Teachers’ Pension Scheme
Benefits of the NITPS

53. NI Teachers’ Pension Scheme
Key benefits of the NITPS
Provides you with a regular income when you retire.
Provides your family or other dependants with financial protection after you die.
If you become too ill to work, you may receive you pension early.
You can purchase additional pension.
If you are a member of the career average arrangements you can purchase scheme flexibilities (faster accrual and actuarial buy-out)

54. NI Teachers’ Pension Scheme
You can choose to have part of your pension paid as a lump sum if you joined the scheme on or after 1 April 2007.
£12 for every £1 of pension surrendered.
If you were a member before 1 April 2007, you will automatically receive a lump sum.
Your pension is index-linked by CPI to protect its value against the effects of inflation.
Your employer makes a substantial contribution towards the cost of your pension.
Provides a lump sum (death grant) if you die before you retire and we may pay children’s and dependants’ pensions.

55. NI Teachers’ Pension Scheme
Further Information

56. NI Teachers’ Pension Scheme
Further Information
NITPS 2015 Frequently Asked Questions – covers FAQ and examples
Available via Department Of Education website – Teaching Staff – Pension Scheme
Copies of the slide show and FAQ will be ed to Schools and Nurseries, and Further and Higher Education establishments after the Pension Road Shows have been completed (4 February 2015).
Series of factsheets
Currently being developed and will be available at the end of February 2015.

57. NI Teachers’ Pension Scheme
Pensions Policy

58. ANY QUESTIONS