Transcript Changes to the Teachers* Pension Scheme 1 April 2015

Changes to the Teachers’ Pension
Scheme 1 April 2015
“At a Glance Guide to who is
affected”
Who is affected?
Members who have full protection - These are members who were active immediately
before 1 April 2012 and who were within 10 years of their Normal Pension Age (NPA) on
that date. These members will remain in final salary.
Members who have tapered protection – These are members who were active
immediately before 1 April 2012 and who were within a further 3.5 years of their NPA
on that date. These members will remain in final salary for a tapered period of time
until they then move into career average on their “transition date”.
Transition members – All other existing members will enter career average on 1 April
2015.
New starters - Join career average on entry if they start teaching on or after 1 April
2015.
Pensioner and deferred members are not affected by the changes unless they take up
further employment.
The tables below highlights the changes from 1 April 2015.
Teachers’ Pension Scheme
design.
TPS Pre 2007
TPS 2007
TPS 2015
Final Salary
Final Salary
Career Average
Accrual Rate (The formula or
rate of “accrual which uses
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 indexation plus
1.6%. If a member is deferred
(out of service) the increase is by
indexation only
Pensionable pay used in
calculation of benefits
Average pensionable earnings
Average pensionable earnings
Pensionable earnings for each
year now including overtime
65
NPA equals State Pension Age
(SPA) or 65 where that is higher
Flexibilities
Additional pension from 1
January 2007
Additional pension
3 options: Additional pension,
faster accrual and buy out of
actuarial reduction
Lump Sum
Automatic lump sum = 3 x
pension
No lump sum but can convert part No lump sum but can convert
of pension to receive an optional part of pension to receive an
lump sum
optional lump sum
Death Grant (one off payment
where a member dies before
becoming entitled to their
pension)
3 x final average salary (Active 3 x final average salary (Active
member)
member)
Phased Retirement
From 1 January 2007 the
Opportunity to take three
opportunity to take 2 phased Opportunity to take two phased
phased retirements (2 before
retirements before final
retirements before final retirement
aged 60) before final retirement
retirement
Normal Pension Age
60
Actuarial Adjustment (where
Benefits actuarially adjusted Benefits actuarially adjusted by
benefits are been taken before by approximately 5% for each approximately 5% for each year
NPA)
year they are taken early
they are taken early
3 x final salary at date of death
(Active member)
Benefits actuarially adjusted by a
fixed 3% for each year they are
taken early subject to a
maximum of 3 years
EMPLOYEE TIERED CONTRIBUTIONS –
1 APRIL 2015
Member contributions are based on their salary, so the more they’re paid,
the higher their contributions. From 2015 the new member contribution rates
are shown below:
Annual rate of pensionable earnings
Member’s contributions 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%
Further communications will be issued shortly, providing more detail on how to calculate
and what is and isn't included. Please ensure that members are aware of the changes to
their contributions.
Part-time members - changes
In the past, for someone working part-time, you looked at the row corresponding to the
member’s full-time equivalent salary. From April 2015, this will change; instead, you’ll
look at their actual part-time earnings.
For example, if someone worked 50% and had a full time equivalent salary of £50,000,
their actual earnings would be £25,000. Under the old structure, the member would pay
10.2% of £25,000. Under the new structure they’ll pay 7.4% of £25,000.
Those working overtime
In the Career Average arrangement (but not the Final Salary), overtime is included in the
salary used to work out the contribution amount but not in working out which tier to
use.
Based on the example above if someone was in the Career Average Scheme and earned
£1,000 of overtime, they would pay 7.4% of £26,000. (Please note that the £1,000
overtime doesn’t change the contribution rate).
And finally…….
Employer Contributions
The contribution rates for employers are:
14.1% from 1st April 2015 until 30th August 2015 inclusive
16.4% plus an administration charge of 0.08% from 1st September 2015
(16.48% in total)
Croydon TP Team
November 2014