Transcript Changes to the Northern Ireland Teachers’ Pension Scheme

Changes to the Northern Ireland
Teachers’ Pension Scheme
NITPS modernisation
Drivers for Change
 Pensions Green Paper and Tax Reform.
 Cost of increased life expectancy.
 Increased Minimum Retirement Age 55 &
Normal Pension Age 65.
 Extending Working Lives.
 Flexibility and retaining experience.
 Overdue scheme improvements.
Agreed package of reforms – new
entrants
Provisions for NEW ENTRANTS from
1 April 2007 will include:
+ Normal Pension Age (NPA) of 65
+ Minimum Retirement Age of 55. except on grounds of
ill health.
+ Pension based on 1/60th of salary for each year of
pensionable service with the flexible option to take
up to 25% of ‘fund value’ after commutation as a
tax-free lump sum by surrendering £1 of annual
pension for £12 of lump sum.
Agreed package of reforms – new
entrants (cont’d)



The better of the last year’s salary or the ‘revalued (in line with RPI) average of the best
three consecutive years’ salary in the last ten
years of service to be used for calculating
benefits at retirement.
A facility to purchase up to £5,000 of added
annual pension.
A death grant of three times salary.
Agreed package of reforms – new
entrants (cont’d)




Automatic part-time membership.
Dependants’ benefits payable to unmarried
partners.
Spouses’ and nominated partners’ pensions
paid for life.
Revised ill-health retirement package – tiered
approach with a higher level of benefits for
total incapacity, lower level for partial
incapacity.
Agreed package of reforms – new
entrants (cont’d)



Phased retirement arrangements. These
would enable NITPS members, under defined
circumstances, to continue working as a
teacher within the NITPS while drawing down
some of their accrued pensions benefits.
Actuarial enhancement for those who
continue in work beyond NPA 65 without
accessing their pension benefits.
Actuarial Reduced Benefits.
Agreed package of reforms – new
entrants (cont’d)
EXISTING MEMBERS will retain NPA of 60 and the
current arrangements will be modified and improved
in the following ways:
 Minimum Retirement Age of 55 by 2010, except on
grounds of ill health.
 Automatic part-time membership – change in
contract.
 Dependants’ benefits payable to unmarried partners.
 Spouses’ and nominated partners’ pensions paid for
life.
Agreed package of reforms – new
entrants (cont’d)




The better of the last year’s salary or the ‘re-valued
(in line with the RPI) average of the best three
consecutive years’ salary in the last ten years of
service’ to be used for calculating benefits at
retirement.
Revised ill-health retirement package – tiered
approach with a higher level of benefits for total
incapacity, lower level for partial incapacity.
More scope to take a higher tax-free lump sum and a
lower level of pension.
A facility to purchase up to £5,000 of added annual
pension.
Agreed package of reforms – new
entrants (cont’d)



An increase in the death grant to three times
salary.
Phased retirement arrangements. These will
enable NITPS members, under defined
circumstances, to continue working as a
teacher within the NITPS while drawing down
some of their accrued pension benefits.
Actuarial Reduced Benefits.
New entrant?



No pensionable service before 1 April 2007.
Retention of NPA 60 arrangements would be
restricted to those who return after a break in
pensionable employment of no more than five
years.
Those who return after a longer break would
be subject to a pension age of 65 in respect
of their future service. Accrued benefits
would still be payable in full from age 60.
New entrant? (cont’d)


Transitional protection for those currently out
of service – protection for those who return
to teaching by 31 March 2008 regardless of
the length of the break in their service.
Thereafter the five year limit would apply to
any subsequent break in service.
There will be a minimum period of scheme
membership that must be undertaken after a
break in pensionable service.
Normal pension age protection
Automatic part-time



Current situation is that part-time members
need to elect to join the NITPS.
With effect from 1 April 2007, new appointees
will automatically be in the NITPS.
Existing teachers who start on a new contract
after 1 April 2007, will automatically be in the
NITPS.
Automatic part-time (cont’d)



Anyone in non pensionable part-time
employment on 1 April 2007, will
remain in non pensionable employment
unless they make a part-time election.
Part-time members who do not wish to be in
the NITPS will need to opt out, signing a
declaration confirming they understand the
consequences.
No retrospection after 1 April 2007 to achieve
existing member status.
Average salary


From 1 April 2007, the calculation of pension
benefits will be based on the better of the
salary in the last year, or the average of the
best three consecutive years (re-valued in line
with RPI) in the last ten years.
‘Stepping Down’ arrangements will become
obsolete under this approach and will be
discontinued from 1 April 2007 (existing
elections will be honoured).
Average salary (cont’d)


A 10% cap on any salary increase in
each of the last three years of service
will be introduced if the last year is the
best year.
Transitional arrangements will be put in
place.
Ill-health benefits


From 1 April 2007, there will be a new two
tier ill-health retirement provision applying to
both existing and new members.
- Upper Tier – “Total incapacity benefit”
(TIB): with enhancement of one half of
prospective service to a member’s NPA (60 or
65)
- Lower Tier – “Partial incapacity
benefit” (PIB): based on accrued benefits
without any enhancement.
No actuarial reduction will be applied.
Ill-health benefits (cont’d)


Must be permanently unfit for teaching duties
in both cases.
The NITPS will take advice from Medical
Advisors on a member’s ability to work. Two
tiers of pension may be paid:


Upper Tier, for those incapable of teaching and
any other “gainful employment”.
Lower Tier, for those permanently incapable of
teaching, but capable of a range of other types of
work.
Ill-health benefits (cont’d)




Deferred members will qualify for lower tier
benefits if they develop a condition
preventing them from undertaking any gainful
employment.
For lower tier, pensioners would be free to
undertake any work outside teaching and
remain entitled to PIB.
Only TIB cases will need to be reviewed if reemployed.
Disputes will be handled as currently (appeals
process).
Phased retirement




‘Reduced capacity’ will require a minimum
drop in pensionable income of 25% lasting
for at least 12 months.
You will be allowed to draw down on your
pension on two separate occasions up to a
maximum of 75% of benefits before
‘retirement’.
Benefits taken before NPA would be subject
to actuarial reduction.
No qualifying period will be needed in respect
of further service.
Phased retirement (cont’d)



No abatement on pension drawdown
where payments have been actuarially
reduced.
Time periods for elections and finding
new post.
Benefits from residual service can be
taken later as a deferred payment or
can be combined with future service.
Added pension


From 1 April 2007, it will not be possible to
buy additional service in the NITPS either by
PAY or CAY. Existing contracts with start
dates before 1 April will be honoured.
Members will instead be able to elect to pay
contributions, which will result in and
additional pension in minimum £250 blocks
up to a maximum of £5,000 per annum. This
additional pension will be subject to PI.
Survivor partner benefits


Survivor partner benefits will be available for
service from 1 April 2007, in respect of
unmarried and unregistered partnerships.
Various conditions. The member must:




Have lived with the partner for two years
Be able to marry or enter a civil partnership
Be financial interdependent e.g. share household
spending, have joint bank account, etc.
Pre 1 April 2007, service can be covered but
this must be done within six months of
nominating the partner.
Death benefits


From 1 April 2007, the death in service
lump sum is to increase to three times
the new average salary.
The accrual rate for survivor’s benefits
will remain at 1/60th for each year of
eligible service, but based on new
average salary.
HMRC flexibilities



The current 15% contribution limit to
be lifted.
The 40 year limit on pensionable service
to be lifted.
The age 65 limit on NITPS membership
to be raised to 75.
Contribution rates - members
Members
 The member contribution rate will rise from
6% to 6.4%.
 The effect of combining the scheme reforms
and improvement with retention of NPA 60
for existing members, will require an increase
of 0.2% in the contribution rate for all
members.
 A further increase of 0.2% will be applied as
the members’ share of the outcome of the
2004 NITPS valuation.
Contribution rates – employers
Employers
The employer contribution rate will fall from
14.15% to 13.6%
+There will be a ceiling on the employer
contribution rate that would take effect from
the 2008 valuation onwards.
+There will be an equal division between
members and employers of any cost
increases or saving that may result from
future valuations.
New member fact sheets
There will be a number of fact sheets on:
 NITPS Members’ Guide
 Planning for retirement
 Leaving pensionable employment
 Returning to work after receiving pension
benefits
 Additional Pension
 Increasing your pension benefits
 Ill-health benefits
New member fact sheets (Con’t)








Ill-health retirement benefits and reemployment
Working part-time before retirement
Average salary
Partner benefits
Death benefits from 1 April 2007
Maternity/paternity
Pensions on divorce
Deferred members at 31 March 2007