Rep Powerpoint May 2022 Overview All teachers moved into career average scheme from 1 April 2022 Most teachers will have some legacy rights in final salary scheme these are fully protected ID: 1029167
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1. Teachers’ Pension Scheme Rep PowerpointMay 2022
2. OverviewAll teachers moved into career average scheme from 1 April 2022Most teachers will have some legacy rights in final salary scheme – these are fully protectedTeachers will have choice between final salary (FS) scheme and career average (CA) scheme for period 1 April 2015 – 31 March 2022. Known as ‘McCloud remedy’ due to age discrimination caseChoice between FS and CA made at retirementTeachers who joined on or after 1 April 2012 (or not in service on 1 April 2015) not covered – members of career average scheme only
3. Career Average (CA) scheme Each year members ‘bank’ 1/57 of pensionable earningsThe amount banked is increased each year until retirement. At retirement all separate years add together to form total pensionIn-service members have their pension rights revalued each April with CPI inflation + 1.6 per centOut of service teachers have their pension rights revalued annually by CPI onlyIf member leaves service and returns within five years then treated as in-service for whole period
4. CA Scheme example Alice joins the CA scheme on 1st December 2022. Between 1st December 2022 and 31st March 2023, Alice earns £15,000. Her CA pension for that year is: £15,000 x 1/57 = £263.16.From 1st April 2023 to 31st March 2024 she earns £35,000. Her CA pension for that year is: £35,000 x 1/57 = £614.04Alice’s CA pension at 31st March 2024 is: £614.04 + £272.63 (£263.16 + 3.6 per cent) = £886.67N.B. inflation (CPI) in this example is 2 per cent
5. Pension ageCareer average scheme normal pension age (age at which you can take pension rights in full) linked to state pension ageBased on age as at 1 April 2022Work till 68 for a full pension if aged 44 or underWork till 67 if aged 45 to 60 Work till 66 if aged 61 to 66Pension age may be even higher in future = 70+ for youngest teachersFinal salary scheme members keep normal pension age at either 60 or 65
6. Operation of career average schemeCA pension based on pay – every payslip counts!Fragmentation of education system risks lower administration standardsVital that members frequently check and correct records. Records assumed to be correct unless evidence to contraryMembers should keep payslips, P60s and TPS pension statementsMembers need to sign up with TPS’s ‘MyPensionOnline’ service to get pension statements
7. Pension Build Up (FS60)Applies to members who joined on or before 31 December 2006.Pension is 1/80 of final pensionable salary for each year of reckonable serviceIf final salary = £30,000 and 20 years’ full-time membership then the pension will be: £30,000 x 20/80 = £7,500 a year3/80 of final salary automatically paid as tax free cash for each year of service (i.e. 3x pension)Pension payable in full at age 60
8. Pension Build Up (FS65)Applies to members who joined on or after 1 January 2007Pension is 1/60 of final pensionable salary for each year of reckonable serviceIf final salary = £30,000 and 20 years’ full-time membership then the pension will be: £30,000 x 20/60 = £10,000 a yearNo automatic tax free cash includedMembers currently in teaching can take up to 25 per cent of pension rights as cash. Pension converted into cash at £12 of cash for each £1 of pension given upPension payable in full at age 65
9. Contribution rates (April 2022)Average employee contribution rate = 9.6 per centContributions based on actual salary, not FTE salaryContribution rate levied on whole earnings (not 7.4 per cent on first £29,187 etc)Employer contribution 23.6 per cent from 1 September 2019Salary BandContribution Rate£0 - £29,1877.4%£29,188 - £39,2908.6%£39,291 - £46,5869.6%£46,587 - £61,74210.2%£61,743 - £84,19311.3%£84,194+11.7%
10. Interaction between FS and CA pension rightsMost teachers will have FS pension and CA pensionFinal salary based on salary when exit teachingMembers 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 rightsIf member takes FS pension before FS NPA (i.e. as an actuarially reduced pension) – member must also take CA pension rights
11. What happens next?TPS valuation 2016 re-calculated including cost of McCloud remedy. Accrual rate in TPS should have been improving from 1/57 to approximately 1/49.2 (around a 16 per cent improvement) from April 2019. This was scrapped owing to the cost of including McCloud in valuationTPS valuation 2020 results due in early 2023Any change to employer contributions would happen in April or September 2024
12. Who is looking after your pension?TPS administered by Teachers’ Pensions (TP)Website: www.teacherspensions.co.uk Phone: 0345 6066166 Register for TP Online Service ‘My Pension Online’ – gives online access to your benefit statement (updated monthly)NEU pensions content at www.neu.org.uk/pensions