Transcript Universal Credit Starting Gate Update

NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme
2015 Change Overview
January 2015
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NI Teachers’ Pension Scheme
Objectives
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NI Teachers’ Pension Scheme
Today’s aim is to provide an awareness of the changes to
the scheme and how those affect you.
Objectives :
• Background
• Overview of the reformed NITPS
• Awareness of who will join the career average
arrangements
• Information on when you can retire
• Awareness of how career average will work
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NI Teachers’ Pension Scheme
• Scheme Flexibilities
• Options for Additional Pension
• Information on how the benefits are different from now
• Summary of Changes
• Benefits of the NITPS
• Further Information
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NI Teachers’ Pension Scheme
Background
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NI Teachers’ Pension Scheme
• The pension landscape for public service pensions has
changed dramatically over the past decade.
• In 2007 the NI Teachers Pension Scheme (NITPS) was
reformed resulting in the normal pension age for new
entrants increasing to 65 from 2007 .
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NI Teachers’ Pension Scheme
• 2010 – Independent Public Service Pensions
Commission (IPSPC) chaired by Lord Hutton.
• October 2010 - interim report published.
o Increased member contribution rates were recommended as an
appropriate means to make short term savings in the cost of
public service pension provision.
• 10 March 2011 - final report published.
o Further recommendations for long term structural reform of
public service pension schemes, mainly the introduction of
Career Average Schemes and an increase in Normal Pension
Age to State Pension Age.
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NI Teachers’ Pension Scheme
• Between April 2012 and April 2014 there have been
annual increases in member contribution rates.
o Members now pay an average of 9.6% of Salary.
• March 2014 - the Public Service Pensions Act (NI) 2014
o Closes existing public service schemes, including the NITPS and
sets the parameters within which the public sector pension
schemes must operate going forward from April 2015.
• 12 December 2014 – The Teachers Pensions
Regulations (NI) 2014 established the reformed NITPS.
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Overview Of The Reformed
NITPS
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NI Teachers’ Pension Scheme
The main features of the new scheme are:
• A pension design based on career average earnings
instead of final salary.
• An accrual rate of 1/57th; of pensionable earnings each
year.
• Normal Pension Age (NPA) equal to State Pension Age
(SPA), which applies both to active members and
deferred members (new scheme service only). If a
member’s SPA rises, then NPA will do so too for all post2015 service.
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NI Teachers’ Pension Scheme
• Revaluation of active members’ benefits in line with
consumer prices index (CPI ) +1.6%.
• Pension in payment to increase in line with Prices Index
(currently CPI).
• Benefits earned in deferment to increase in line with CPI
• Average member contributions of 9.6% with some
protection for the lowest paid.
• Optional lump sum commutation at a rate of 12:1, in
accordance with HMRC limits and regulations.
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NI Teachers’ Pension Scheme
• Spouses/partner pension in accordance with current
provisions.
• Lump-sum on death in service of 3 times full time
equivalent (FTE) salary.
• ill-health benefits the same as those in the current open
scheme.
• Actuarially fair early/late retirement factors on a cost
neutral basis except for those with a NPA above age 65,
who will have early retirement factors of 3% per year for
a maximum of 3 years in respect of the period from age
65 to their NPA.
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NI Teachers’ Pension Scheme
• An employer cost cap to provide back stop protection to
the taxpayer against unforeseen costs and risks.
• Public sector transfer club will continue.
• Phased retirement arrangements which reflect those in
the current scheme, with the additional option of a third
drawdown of benefits after a member’s 60th birthday.
• Abatement will not apply to service in the reformed
NITPS. Abatement rules for the current scheme will
remain unchanged.
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NI Teachers’ Pension Scheme
• Members who leave the scheme and return within 5
years will have their accrued service in the current (NPA
60/65) scheme linked to their final salary at retirement.
• Flexibilities to allow members to elect to pay a higher
contribution rate in return for a higher accrual rate for a
particular year, at full member cost, within existing limits
on additional pension
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NI Teachers’ Pension Scheme
• Members who in the new scheme have a NPA higher
than 65 will have an option in the new scheme to pay
additional contributors to reduce or, in some cases,
remove any early retirement reduction that would apply,
if they retire before their normal pension age.
o Only reductions that would apply in respect of years after age 65
can be bought out and the maximum reduction that can be bought
out is for 3 years (that would apply to a member with a Normal
Pension Age of 68 or higher).
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NI Teachers’ Pension Scheme
Awareness Of Who Will
Join The Career Average
Arrangements
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NI Teachers’ Pension Scheme
• Not all members will move into the career
average arrangements.
• Members who meet certain criteria will
remain in the existing final salary
arrangements.
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Fully Protected Members
Active members in the NITPS NPA 60 or NPA 65 schemes
on 31 March 2012, and were within 10 years of their
normal pension age on 1 April 2012 will remain in their
final salary arrangements. These members are fully
protected.
• Remain in Final Salary Arrangements
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NI Teachers’ Pension Scheme
Tapered Protection Members
Active members in the NITPS NPA 60 or NPA 65 schemes
on 31 March 2012 who were between 10 and 13.5 years of
their normal pension age on 1 April 2012 are tapered
protection members.
• A transition date to move to the career average
scheme
• Pension based on final salary and career average
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NI Teachers’ Pension Scheme
Availability of Full and Tapered Protection
• ‘Full and Tapered protection’ is only available as long as
a member does not have a continuous break of more
than five years or does not take their pension benefits
(other than phased benefits).
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NI Teachers’ Pension Scheme
Transitional Members
Transitional members are current members who move to
the career average scheme on 1st April 2015.
• Move to career average scheme on 1 April 2015
• Pension based on final salary and career average
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New Entrants
New members who enter the NITPS scheme on or after 1
April 2015 will join the career average scheme.
• Pension based on career average
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Information On When You
Can Retire
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When A Member Can Retire
• If a member is ‘fully protected’ and has had no breaks in
service of more than 5 years they will have remained in
the final salary NPA 60 or NPA 65 schemes and will be
able to take their retirement benefits at their final salary
NPA without an actuarial reduction.
o Otherwise their retirement benefits will be actuarially reduced by
5% per year before their normal pension age.
• NPA in the career average arrangement is equal to state
pension age.
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NI Teachers’ Pension Scheme
• A member with tapered/partial protection or an active
member with ‘transitional protection’ must claim both
final salary and career average benefits at the same
time.
• Where the member is out-of-service final salary benefits
can be taken without career average benefits when a
member reaches their NPA in their existing final salary
arrangements. The member will be able to claim their
benefits from final salary, without having to claim their
benefits from the career average arrangements.
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NI Teachers’ Pension Scheme
• If a member is out of service and wishes to claim all their
benefits at their final salary NPA.
o Career average benefits will be actuarially reduced (5% per year
before age 65 and 3% per year to their career average NPA –
maximum period of 3 years).
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Awareness Of How Career
Average Will Work
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How an active member’s pension builds up in career
average (no breaks in service)
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How a member’s pension builds up in career average
with a break of no more than 5 years service
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How a member’s pension builds up in career average
with a break of more than 5 years in service
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Scheme Flexibilities
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Who can access flexibilities?
• Flexibilities are only available to career average
members.
o Tapered members will only be able to access career average
flexibilities once their protected period has expired and they have
joined the career average scheme.
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NI Teachers’ Pension Scheme
What is faster accrual?
• A member can elect to pay higher contributions in career
average, to earn a higher pension.
• The normal rate of accrual or growth in pension is based
on 1/57th of their actual earning for that year.
• Member can pay higher contributions so that growth in
their pension can be 1/45th, 1/50th and 1/55th of their
actual earnings for that year.
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NI Teachers’ Pension Scheme
When does a faster accrual election start and end?
• Each election lasts for one financial year (1 April to 31
March). An election must be made in the year before the
member wants it to take effect. This would ideally be
before the end of January to allow the Department and
employer to process the election before 1 April.
• If a member enters teaching mid-year they can make an
election for the remainder of that year, but the member
must make it within one month of entering service.
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NI Teachers’ Pension Scheme
What is actuarial buy-out?
• Members in career average can pay additional
contributions, which allows them to retire from 65 but
before their normal pension age (NPA) without their
benefits being actuarially reduced.
• Members can purchase 1, 2 or 3 years buy-out
dependent on their NPA. Contributions are paid
throughout their career unless they leave service for 30
days or more, when the election is deemed to be
cancelled.
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NI Teachers’ Pension Scheme
• For member’s to avail of actuarial buy-out flexibility,
members must make an election within 6 months of
entering the career average scheme as this flexibility is
only available when the member joins the career
average scheme.
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NI Teachers’ Pension Scheme
What happens if a member has more than one
employer and chooses to make a flexibilities election?
• If a member has more than one employer, they are
required to notify the Department and employer that they
wish to make the deduction. If a member makers a faster
accrual election they can choose to have different rates
of deduction from each employer, provided they do not
exceed their overall flexibilities limit.
• However, if a member elects for the actuarial buy-out
flexibility, then it applies to all their employments.
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NI Teachers’ Pension Scheme
Options For Additional
Pension
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NI Teachers’ Pension Scheme
Additional Pension
• As with the current arrangements, members can still
purchase additional pension.
o Purchased in amounts of £250.
o Payment can be monthly or in a lump sum.
Additional Voluntary Contributions (AVC’s)
• As with the current arrangements, members can also
pay additional contributions into the Scheme’s AVC
provision with Prudential.
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NI Teachers’ Pension Scheme
Information On How
The Benefits Are Different
From Now
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NI Teachers’ Pension Scheme
Contribution rates for the NITPS
• Member’s monthly contributions are based on their
actual salary.
• From 1 April 2015 the contribution rates for the NITPS
are changing to the table shown below:
Actual annual pensionable earnings
Member Contribution 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%
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NI Teachers’ Pension Scheme
Club Transfers
• Club arrangements will continue – detail of the new
arrangements still to be finalised and published by the
Cabinet Office
o 12 month time limit will apply.
o need to exercise transfer before a break of more than 5 years
service between public sector schemes .
• Existing arrangements for transfer of comparable teaching
service in the existing Final Salary Schemes (England &
Wales, Scotland and Isle of Man) will no-longer apply
o to facilitate current members a grace period is currently in place
(two years up to 31 March 2017) for members to make
comparable benefit transfers.
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NI Teachers’ Pension Scheme
Breaks in service
• Members’ final salary benefits will continue to be
calculated using the final salary arrangements.
o If a member has a break of 5 years or more this can impact on
their benefits and the amount they receive when they retire.
• If member is fully protected, tapered or a transitional
member and have a continuous break of 5 years or more
and return to employment, they will join the career
average scheme.
o In addition the link to final salary will not be maintained and final
salary will be calculated using the salary when the break in
service commenced to calculate your final salary benefits.
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NI Teachers’ Pension Scheme
ill-health in the career average arrangements
• As with the current arrangements, if a member becomes
unfit to teach they can apply for an ill-health retirement
pension.
• There are two levels of ill-health benefits:
o A member is permanently unable to teach but they are able to
undertake other employment; or
o A member is permanently unable to teach and unable to
undertaken any other types of employment.
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NI Teachers’ Pension Scheme
Time limits for applying for ill-health arrangements
• If the member applies for ill-health retirement within 2
years of leaving pensionable employment and there is
evidence that they left on medical grounds which are the
same reasons for their application, they will be treated
as though they were still in service at the point of making
an application.
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NI Teachers’ Pension Scheme
Normal Pension Age(NPA)
• Members’ NPA in the career average scheme will be
equal to their state pension age or 65 which ever is
higher.
o NI Pensions Bill is currently progressing through the Assembly
• Increase the state pension age from 66 to 67 between 2026 and 2028
o Previous provision will increase state pension age from 67 to 68
between 2044 and 2046
o http://www.nidirect.gov.uk/calculating-your-state-pension-age
• There is no change to a members’ NPA for a member who
remains in the final salary arrangements (NPA 60 and NPA
65)
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Phased Retirement
• As with the current arrangements members can take two
phased retirements from age 55 but in the career
average arrangements members are able to take 3
phased retirements.
o Only two phased retirements can be taken before aged 60 in the
career average arrangements.
o Maximum amount must not exceed 75% of a member’s benefits
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NI Teachers’ Pension Scheme
Death Grant
• In line with the current arrangements there is no
qualification period for the death grant.
• The NITPS provides for different levels of death grant to
be paid depending on whether the scheme member is
active, deferred or a pensioner.
Scheme members status at time of
death
active
Lump Sum (Death Grant)
Career average: 3 x full-time equivalent salary.
Fully Protected: 3 x final average salary.
Tapered Protection: in final salary 3 x final average salary otherwise 3 x
full-time equivalent salary.
deferred
2.25 x scheme members’ accrued pension.
pensioner
5 years worth of pension less amount paid to the scheme member to
date – where member dies within 5 years of drawing their pension.
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NI Teachers’ Pension Scheme
Summary Of Changes
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NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme
Design
Normal Pension Age (NPA)
Final Salary (up to 31//03/2007)
Final Salary (01/04/2007 –
31/03/2015)
Career Average (Post
31/03/2015)
60
65
NPA equals State Pension Age or
65 what ever is higher
Accrual Rate (the formula or
rate of “accrual” which is
based on 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 Consumer Prices Index
(CPI) plus 1.6%.
If a member is deferred (out of
service) the increase is by CPI
only.
Note: for CPI only to be applied
the member has to be deferred for
5 years or more.
Pensionable pay used in
calculation of benefits
Final pensionable salary
Final pensionable salary
Pensionable earnings for each
year and now includes overtime
(Average pensionable salary).
Flexibilities








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Additional pension from 1
January 2007;
Past Added Years (PAY);
Contributions based on a
former higher salary; and
Combined contributions.
Additional Pension
Additional Pension;
Faster accrual; and
Buy out of actuarial
reduction.
NI Teachers’ Pension Scheme
NI Teachers’ Pension Scheme
Design
Lump Sum
Final Salary (up to 31//03/2007)
Automatic lump sum
= 3 x pension
Can also convert part of pension
to receive an o.ptional lump sum
Final Salary (01/04/2007 –
31/03/2015)
No automatic lump sum.
Member has the option to convert
part of their pension to receive an
optional lump sum.
Currently £1 of pension
surrendered equates to £12 lump
sum.
Career Average (Post
31/03/2015)
No automatic lump sum.
Member has the option to convert
part of their pension to receive an
optional lump sum.
Currently £1 of pension
surrendered equates to £12 lump
sum.
Death Grant (one off payment
where a member dies before
becoming entitled to their
pension)
3 x final average salary (Active
member)
3 x final average salary (Active
member)
3 x final salary at date of death
(Active member)
Phased Retirement
From 1 January 2007 the
opportunity to take 2 phased
retirements before final
retirement.
Opportunity to take 2 phased
retirements before final
retirement.
Opportunity to take 3 phased
retirements (2 before aged 60)
before final retirement.
Actuarial Adjustment (where
benefits are taken before a
members NPA)
Benefits actuarially adjusted by
5% for each year they are taken
early.
Benefits actuarially adjusted by
5% for each year they are taken
early.
Benefits actuarially adjusted by
5% for each year they are taken
early (where benefits are taken
before a members 65 birthday),
thereafter adjusted to 3% for a
maximum of 3 years.
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Benefits of the NITPS
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Key benefits of the NITPS
• Provides you with a regular income when you retire.
• Provides your family or other dependants with financial
protection after you die.
• If you become too ill to work, you may receive you
pension early.
• You can purchase additional pension.
• If you are a member of the career average arrangements
you can purchase scheme flexibilities (faster accrual and
actuarial buy-out)
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NI Teachers’ Pension Scheme
• You can choose to have part of your pension paid as a
lump sum if you joined the scheme on or after 1 April 2007.
o £12 for every £1 of pension surrendered.
• If you were a member before 1 April 2007, you will
automatically receive a lump sum.
• Your pension is index-linked by CPI to protect its value
against the effects of inflation.
• Your employer makes a substantial contribution towards
the cost of your pension.
• Provides a lump sum (death grant) if you die before you
retire and we may pay children’s and dependants’
pensions.
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Further Information
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Further Information
• NITPS 2015 Frequently Asked Questions – covers FAQ
and examples
o Available via Department Of Education website – Teaching Staff
– Pension Scheme
o Copies of the slide show and FAQ will be emailed to Schools
and Nurseries, and Further and Higher Education establishments
after the Pension Road Shows have been completed (4 February
2015).
• Series of factsheets
o Currently being developed and will be available at the end of
February 2015.
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NI Teachers’ Pension Scheme
Teachers Pensions
• [email protected]
Pensions Policy
• [email protected]
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ANY QUESTIONS
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