Transcript Local Association Secretaries Pensions Seminar

Glasgow Local Association
Scottish Teachers’ Pensions
27 February 2015
Drew Morrice
Background
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Teachers’ Pension Scheme Reforms 2007
The Independent Review of Public Sector
Pensions
Pensions Act 2013
Scottish Teachers’
Superannuation/Pension Scheme
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Defined benefit occupational pension scheme,
Administered by the Scottish Public Pensions
Agency (SPPA) for Employers
Notional Fund
Underwritten by Government
1 April 2015
Final Salary Scheme
replaced with a
Career Average Revalued Earnings
(CARE) Scheme
Remain in Current Scheme if
within 10 years of Normal
Pension Age (NPA)
at 1 April 2012
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60 if commenced before 1 April 2007
65 if commenced on or after 1 April 2007
Tapered Protection if within 13.5 years of
NPA
You transfer to CARE scheme at a later
date
SPPA will write to:
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Non Protected – mid March
Tapered – mid March indicating transfer
date
Protected – mid April
Preserved – mid June
What are the benefits?
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Pension or Pension and Tax Free Lump
Sum at retirement
Death in Service Benefits (from Day 1)
Widow(ers)’ and Family Benefits
Flexible Retirement Options
Family Benefits
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Death in service grant – 3 times
pensionable salary
Widow’s and children’s pensions based on
service from April 1972
Widower’s and Civil Partner’s pensions
based on service from April 1988
Surviving Nominated Partner’s pensions
based on service from April 2007
Benefit Calculation
(NPA 60)
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Pension = Pensionable Service x
Pensionable Salary/80
22 years 45 days x £35,000/80
= £9,678
Lump Sum = 3 x Pension
= £29,034
Commutation of Pension
(NPA 60)
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Give up part of pension in return for larger
tax free lump sum
Maximum allowable 19.64% of pension
For every £1 surrendered get £12
Pension £9,678 Lump Sum £29,034
Or
Pension £7,778 Lump Sum £51,834
Benefit Calculation
(NPA 65)
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Pension = Pensionable Service x
Pensionable Salary/60
No automatic lump sum
22 years 45 days x £35,000/60
= £12,905
Commutation of Pension
(NPA 65)
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Give up part of pension in return for larger
tax free lump sum
Maximum allowable 35.71% of pension
For every £1 surrendered get £12
Pension £12,905
Or
Pension £8,297 Lump Sum £55,296
Pensionable Salary
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Pensionable salary received in last 12
months before retirement; or
The average of the best 3 consecutive
years in the last 10 years revalued by CPI;
but
Excessive salary increases in last 3 years will be
limited to 10% above substantive salary
Best 3 years in last 10 years
(Point 6 on Maingrade Scale)
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2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
£30,399
£31,008
£31,759
£32,583
£33,399
£34,200
£34,200
1.3021
1.2568
1.2097
1.1521
1.1521
1.1174
1.0622
£39,582
£38,970
£38,419
£37,538
£38,478
£38,215
£36,327
£38,991
£38,309
£38,145
£38,077
£37,673
When Can I Retire?
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From age 60/65 without any reduction in
benefits
Must leave scheme at age 75 but not
teaching
Maximum pensionable service is 45 years
at age 75
Retirement Options
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Actuarially Reduced Pension
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Premature Retirement Compensation
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on efficiency grounds from age 55
Winding Down Scheme
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from age 55
Part time working but eligibility criteria
Phased Retirement
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from age 55 can access some benefits whilst
working part time
Actuarially Reduced Pension
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Employer can withhold permission for up
to 6 months
Reduction in pension and lump sum is for
life
Percentage reduction dependent on age in
years and months
Can return to teach, rejoin STSS and no
earnings restriction
Premature Retirement
Compensation Scheme
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Actuarially Reduced element payable by
SPPA
Mandatory Compensation payable by
Employer
Discretionary Enhancement payable by
Employer
Can return to teach and rejoin scheme but
earnings limits – abatement of pension
Winding Down Scheme
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From Age 56/61
25 years teaching service last 10 full time
Minimum contract 0.5 fte
Maximum period in scheme 4 years
Pensionable salary calculated on 365 days
before winding down but revalued by CPI
Must be with agreement of Employer
Phased Retirement
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Facility to remain in current post, work part time
and draw down pension
Must be aged 55 or over
Must reduce salary by at least 20%
Can access up to 75% of accrued benefits actuarially reduced if under age 60
Can draw down pension on two occasions before
formal retirement date
After Retirement
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Lump Sum is tax free
Pension is taxed at appropriate rate after
deduction of personal allowance
Return to teaching there is a limit to the
amount you can earn unless on ARP
grounds
Increasing Benefits
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Additional Voluntary Contributions
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Return dependant on stock market
Additional Pension Benefits
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Blocks of £250
Cost dependant on age
Lump sum or monthly deduction
APB £250 Comparison
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Age 45
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£3,110 by lump sum or £93.20/month for 3
years
Age 55
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£4,110 by lump sum or £124.10/month for 3
years
Contributions
(from 1/4/15)
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Employee Contribution
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Up to £25,999 – 7.2%
£26,000 - £34,999 – 8.7%
£35,000 - £41,499 – 9.7%
£41,500 – £54,999 – 10.4%
£55,000 - £74,999 – 11.5%
£75,000 + - 11.9%
Employer Contribution
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17.2% of Salary (from 1/9/15)
STPS 2015
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New Career Average Revalued Earnings
(CARE) Scheme from 1 April 2015
Retirement Age linked to State Pension
Age
Age 50/55 or over at 1 April 2012 remain
in current arrangement
Tapered protection if over 46.5/51.5 at 1
April 2012
STPS 2015
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Change will apply to future service – what
you have accrued you keep
Tiered Contributions on actual salary
If transferred to new scheme you can
retire at NPA 60/65 and leave post 2015
service until new pension age
Cost Ceiling for Employer Contributions
Improved Scheme Governance
CARE Accrual
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1/57 + CPI (2%) + 1.6%
Salary 1/57
CPI +1.6% Pension
£34,000 £596.49 1.1519
£687.10
£34,500 £605.26 1.1119
£672.99
£35,000 £614.03 1.0733
£659.04
£35,500 £622.80 1.0360
£645.22
£36,000 £631.57 1.0000
£631.57
Total £3,295.91
Other Options
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Purchase faster accrual for a particular
Year. Decide in April – 1/45, 1/50 or 1/55
Buy out actuarial reduction if NPA 66 or
higher for years after 65. Need to decide
within 6 months of joining
Any Questions