1. TEXT Keith Fenney Employer Relationship Manager Welcome to today’s seminar

2. Webinar -Overview of the changes -How changes will be communicated We’re here today to talk about what those changes mean for members....however Transfers Contributions are still under discussion and we will provide further information on the website as soon as it is available.

3. The basic facts Who is affected? What happens to existing benefits? When can members take age /early retirement? Are there any differences to ill-health benefits? Are there any changes to death benefits? What about family pensions? Flexibilities – what are they? What can you do to help? Will we be communicating changes to members? Some of your questions answered

4. Career average based pension - this is 1/57th of pensionable earnings each year, which includes residential emoluments and overtime Pension benefits calculated annually and added together at retirement Indexed each year that a member is in service by using factors provided by HM Treasury + 1.6% added to their accrued pension benefits Out of service members’ benefits will receive indexation only (not 1.6%) NPA in career average will be equal to SPA or 65 where that is higher The basic facts

5. Who is affected Full Protection Active members at 1 April 2012 within 10 years of Normal Pension Age (NPA) remain in final salary - unless they have a disqualifying break Tapered Protection Tapered protection for members within a further 3.5 years of their NPA remain in final salary until a later date then move into career average - unless they have a disqualifying break Transition members Other existing members enter career average on 1 April 2015 New starters- on or after 1 April 2015 Join career average on entry

6. Member profiles - Andy Date entered TPS - 1 September 1979 NPA in current scheme - 60 Age on 31 March 2012 – 54 Type of member at 1 April 2015 - Fully Protected NPA on 1 st April 2015 - 60 Andy will remain in the final salary arrangements until his retirement. Andy – the protected member

7. Member profiles - Haroon Date entered TPS – January 2008 NPA in current scheme - 65 Age on 31 March 2012 – 52 years, 2 months Haroon will remain in final salary arrangements until his transition date of the 1 August 2016 when he moves to career average arrangements and his NPA will change to 66. Haroon – the tapered member

8. Member profiles - Dianne Date entered TPS – Sept 1999 NPA in current scheme - 60 Age on 31 March 2012 – 36 Type of member at 1 April 2015 – Transition NPA on 1 st April 2015 - 67 Dianne will build up benefits in career average. Dianne – the transition member

9. Member profiles - Katy Date entered TPS – April 2015 Type of member at 1 April 2015 – New member NPA on 1 st April 2015 - 68 Katy will build up benefits in career average. Katy – post 2015 new member

10. Dianne is an active member and the indexation value is 2.5% Dianne’s earnings for 1 April 2015 to 31 March 2016 are £30,000. She will earn a pension for that year of: £30,000 x 1/57 th = £526.32 At the start of her second year of service (April 2016) her pension ‘banked’ in year 1 (£526.32) is increased by 4.1% (Indexation of 2.5% plus 1.6%) Increase £526.32 x 4.1% = £21.58 Dianne’s total pension for the year is £526.32 + £21.58 = £547.90 Example

11. What happens to existing benefits? Existing final salary benefits are not transferred into career average but remain as final salary benefits Any final salary benefits that a member has built up may be linked to their final average salary in career average at retirement, provided they do not have a break in service of more than 5 years Therefore a member will still benefit from any growth in salary Where a member has a break of more than 5 years they lose any protection and the final salary link Pensioner and deferred members are not affected unless they take up further employment in TPS

12. Salary link and overtime For transition members who have benefits in both final salary and career average and do not go on to have a continuous break in service of more than 5 years, their final salary benefits are protected and will remain in final salary. When they retire, we’ll use the salaries they are earning in career average to calculate the average salary used in determining final salary benefits as well (rather than the salary they were on when they left the final salary arrangements). Average salary is the greater of the last 365 days of pensionable salary, or the average of the best three consecutives years salaries re-valued in the 10 years prior to leaving service This means a member will still benefit from any growth in their salary. This is called the final salary link. Any overtime earned for members who are in the career average arrangements will be pensionable but will not be taken into account in calculating any final salary benefits

13. Example – Dianne the transition member 5 years pensionable service NPA 60 Salary £30,000 Entered career average – 1.4.15 Builds up 20 years of benefits in career average without a break in service When she retires her salary is £60,000 Final salary pension = 5 years service x £60,000 (average salary at point of retirement) / 80 th = £3,750 pension + automatic lump sum If she continues to work without a break for a further 20 years in the career average arrangements the benefits she has accrued each year will be added to her final salary pension.

14. Example – Vicki a transition member break in service 5 years pensionable service NPA 60 Salary £30,000 Entered career average – 1.4.15 Worked 1 more year then worked 10 years overseas. Re-joined TP and complete further 8 years Final salary pension = 5 years service x £30,000 (average salary at point of retirement) / 80 th = £1,875 pension + automatic lump sum (with resulting pension increased in line with inflation) + 9 years career average pension = £10,000 Total = £1,875 + £10,000 = £11,875

15. Recording service –protected members Overtime is not treated as pensionable Only deduct contributions from salary excluding any overtime Emoluments will remain pensionable Overtime should still be recorded (in the ‘other allowance’ field) when completing any service returns or updates – in case of any future queries from the member Andy NPA 60 Darren NPA 65

16. Recording service – tapered members still in final salary Whilst in final salary, any overtime is not pensionable Only deduct contributions from salary excluding any overtime Emoluments will remain pensionable Overtime should still be recorded (in the ‘other allowance’ field) when completing any service returns or updates – in case of any future queries from the member. Haroon

17. Recording service – new or transition members Overtime is pensionable Deduct contributions from both salary and overtime earned When submitting your service return the line must be split to show the period in which the overtime was earned if it spans the transitions date. Dianne Katy

18. When can members take age retirement? As now a member must be out of pensionable employment to claim any age benefits An in-service member will have to wait until their new normal pension age to claim both their final salary and career average benefits if they leave after reaching their final salary NPA they are entitled to those benefits Out of pensionable service members have a choice of taking their career average benefits with a reduction, or leaving them until they reach their normal pension age When a member takes their career average age benefits, they have to take their final salary benefits as well if they have not already accessed them The final salary normal pension age remains as 60 or 65 depending on when the member joined the scheme

19. Retirement option –protected members No changes to current retirement arrangements for protected members Members can still take their age benefits at 60 or 65 Members can still take AAB, phased retirement and premature retirement. Andy NPA 60 Darren NPA 65

20. Retirement option - transition member If benefits have been accrued in final salary, these can be taken at current NPA as long as member is out of service AAB – if taken after 55 but before either of NPAs, have to take both final salary and career average benefits at the same time Premature retirement – all retirement benefits to be taken at the same time 3 phased retirements, 2 before age 60 and can choose to take different percentages of each benefit, subject to the overall maximum of 75% Dianne

21. Retirement options – tapered members Before transition date to career average options are the same as a fully protected member and only able to take two phased retirements After transition date to career average, become a transition member and will have same retirement options as transition member Haroon

22. Retirement options –new member NPA linked to state pension age Can retire anytime from 55 and take AAB or continue to work until NPA and take age retirement 3 phased retirements but only 2 before age 60 Katy

23. Can a member still take early retirement? Members can still take AAB after age 55, but they must take both their career average and final salary benefits Employers can still grant a member premature retirement after age 55, but the member must take both their career average and final salary benefits Members can also take 3 phased retirements before finally retiring, but only two may be before age 60 Members in the final salary arrangements can only take 2 phased retirements before taking full retirement

24. Are there any differences to ill health benefits? If a member leaves pensionable teaching service and within 2 years applies for ill health because of the same illness, their application is treated as an in service application If a member’s responsibilities or their working pattern reduces because of illness and they subsequently apply for ill health because of the same illness, any enhancement would be considered as if they are still in their original post. This will be known as ‘stepping down’ as a result of ill health. This change only applies where the illness is the same one that led to the stepping down Career average enhancement is calculated as half a member’s potential service to NPA x final pensionable earnings/57

25. Ill health–protected member Leaves service even though he has been seeing the doctor regularly and undergoing a range of tests After he has been out of service for 18 months his doctor diagnoses that he has Parkinson’s Disease, which was present when he left service He is assessed as though he is still in service and granted ill health benefits on that basis Darren NPA 65

26. Ill health–deferred member Ian left service in 2006 and has accrued 10 years final salary benefits. He applies for ill health benefits in 2018 as he was involved in a serious work related accident Ian did not leave service because of the illness so his application is assessed using the total incapacity criteria His application is rejected as he is still considered to be capable of undertaking some form of employment Ian

27. Ill health – tapered member Haroon reduces his working pattern from five days to three days a week due to difficulties in walking and general skeletal pain After 3 years he is diagnosed as suffering from MS and his consultant has confirmed that the illness was present when he stepped down to work three days The medical assessment recommends he should be granted total incapacity benefits, which are an enhancement to his ill health benefits. This is calculated using the full time salary before the adjustment Haroon

28. Ill health- transition member Dianne reduces her working pattern to 3 days each week because of hearing problems. After two years Dianne is diagnosed with a back condition and applies for ill health retirement. The assessment is that she should be granted accrued benefits only as the severity of her illness is not such as to grant total incapacity. Dianne will receive a pension based on her actual benefits in two arrangements. As she has not had a break in service the final salary benefits are calculated using her career average earnings. Dianne

29. Enhancement –part-time members Katy works 50% part-time in an academy and received an annual salary of £25,000, the full-time equivalent of which is £50,000. Any enhancement to Katy’s pension would be calculated using an annual salary of £50,000. Where a member works more than full-time (i.e. Multiple employment), the full-time equivalent salary would be calculated by taking account of the rate for each employer involved. Katy

30. Enhancement -tapered member Haroon works 60% part-time in a FE college and receives an annual salary of £36,000, the full-time equivalent of which is £60,000. He also works 50% part-time in another teaching role receiving an annual salary of £25,000 against a full-time equivalent salary of £50,000. Any enhancement would be calculated using an annual salary of £55,454.55, calculated as: (£60,000 x 60/110) + (£50,000 x 50/110) Haroon

31. Are there any changes to death benefits? If a career average member dies in service, a death grant of 3 times their final salary at the date of death is payable If a deferred career average member dies out of service, a death grant equivalent to 2.25 times their accrued earned pension is paid if there is a survivor’s pension If a survivor’s pension is not paid then the death grant is the higher of the equivalent of 2.25 times the member’s accrued earned pension or the balance of their contributions, plus interest is paid

32. Death grant – career average member If a career average member dies in service a death grant of three times their final full time equivalent (at the date of death) will be paid If their final salary included any overtime it would not be included in the calculation. Dianne Katy

33. Death grant -tapered member If a tapered member dies in service the value of the death grant will depend on whether or not he has passed his transition date. If he is still a final salary member then the death grant will be three times his final average salary when he dies. If he has passed his transition date, a death grant of three times his final full-time equivalent salary at the date of death will be paid. If his final salary included any overtime it would not be included in the calculation. Haroon

34. Death grant–protected members If a protected member like Andy or Darren dies in service then the death grant will be three times his average salary when he dies. It will be calculated using final salary arrangements. Andy NPA 60 Darren NPA 65

35. Death grant –re-employed pensioner Rhys If Rhys dies within 5 years of his retirement, a death grant will be paid which is equal to 5 years pension less any pension paid to the date of death. If Rhys was receiving both final salary and career average benefits, then the death grant calculation would take both into account. He would also receive an in-service death grant of 3 times his final salary at the date of death, less any lump sum he had received when he originally retired.

36. What about family benefits? Enhancement will continue to apply where a member dies in service Any enhancement is based on the arrangements the member is in when they die Enhancement for career average members uses the same calculation as ill health enhancement. This is added to the member’s accrued earned pension i.e. half a member’s potential service to NPA x final pensionable earnings/57 The adult dependent will receive 37.5% of a member’s retirement earned pension at the date of death e.g. Member’s £1,000 career average benefit, adult dependent would receive £375

37. Who can receive a beneficiary pension? Eligible beneficiaries include: a member’s spouse or civil partner nominated partner dependent children a financially dependant unmarried close relative nominated by a single member.

38. Long term pensions – protected member If Andy dies in service his beneficiary will receive: A short term pension based on this final salary for 3 months A long term pension = 1/160 of his average salary x his family benefits service + enhancement (calculated in line with final salary arrangements) Andy

39. Long term pension - transition member If Dianne dies in service her adult beneficiary will receive: Long term pension calculated as 37.5% of accrued pension + enhancement (1/2 prospective service x 1/57 th of annual rate of pensionable earnings before she dies (If out of service – no enhancement would be paid) Final salary benefits – 1/160 of Dianne’s average salary multiplied by her family benefit service Dianne

40. Long term pensions-tapered member Haroon If Haroon dies in service their adult beneficiary will receive: Short term pension for 3 months based on final salary Long term pension will depend on whether he has passed his transition date Not passed – calculated as a protected member Passed – calculated as a transition member

41. What are the new flexibilities? Additional pension continues to be available for all member regardless of which arrangements they are in If a member has already purchased AP in final salary arrangements and move into career average this will not affect their career average maximum Career average members can choose to purchase ‘faster accrual’ each year When a member first enters career average they can also purchase ‘buy out’ of actuarial adjustment There is an overall maximum for all 3 flexibilities, the current limit is £6,500 and includes the value of any faster accrual, additional pension or buy out of the actuarial adjustment in 2015 - 2016

42. Flexibilities – what is faster accrual? Only available to members in the career average arrangements. In career average, the standard accrual rate is 1/57th of pensionable earnings A member can elect to purchase a faster accrual rate by paying higher contributions and they have 1 month to make an election Elections are required for each scheme year which runs from 1 April to 31 March and must be received by Teachers’ Pensions in the year prior to the year for which the election is to take effect. Transition members will need to elect before 1 April 2015 if they wish to purchase faster accrual for the scheme year 1 April 2015 to 31 March 2016 The accrual rates a member can elect to purchase are: 1/55 th, 1/50 th or 1/45 th

43. Example of faster accrual? Accrual Rate Pension bought in one year Extra pension from higher accrual 1/57 th (standard)£526.31- 1/55 th £545.45£19.14 1/50 th £600.00£73.69 1/45 th £666.67£140.36 Katy – the new starter Earnings for 1 April 2015 -31 March 2016 at £30,000 Pension for the year will be £30,000 x 1/57 th = £526.31

44. Who can apply for faster accrual? Yes Tapered – once they pass their transition date Transition member New starter No Protected member

45. Flexibilities – what is buy out? Only available to members in career average If a member decides to retire before their NPA and takes AAB, their benefits are reduced by approximately 5% for each year that the benefits are taken early Where a member has an NPA over 65 in career average and elects to take their benefits before their NPA, the reduction that would apply between 65 and their NPA is at a rate lower for 3% each year Member will have the chance to buy out the actuarial adjustment for 1, 2 or 3 years, depending on the number of years between 65 and their career average NPA Member must make their election within 6 months of first joining career average

46. Who can apply for buy out? Yes Tapered – once they pass their transition date Transition member New starter No Protected member

47. What should employers do now? Missing service will have a real impact on an individual as they could be in the wrong scheme arrangements and have an incorrect NPA Ensure your annual return is completed on time with accurate information Ensure all employee records are kept up to date and retained in accordance with the regulations Make sure your members check their Annual Benefit Statements Consider moving to MDC, which will improve the quality of your data and reduce queries

48. How will we communicate these changes? Direct engagement with employers Seminars Webinars Pop up office events

49. teacherspensions.co.uk/change2015

50. Diary of communication

51. Any questions?