Proposed TPS - case studies

This case study illustrates how the proposed new Teachers' Pension Scheme (TPS) will differ from current arrangements.

The amounts quoted below have taken into account assumed inflation over the next 40 years. This is a case study only and purely illustrates the differences between the proposed new Teachers Pension Scheme and current arrangements.

In this case study, the pension has been reduced as the member is retiring early under the proposed CARE scheme. The member could choose to defer taking the pension accumulated in the new TPS CARE scheme until later, in which case the reduction would be smaller. However, each individual member's circumstance will vary.

The penion payable had the individual not chosen to retire early is listed for reference.

Case study 5

A teacher started work in 2005 at age 25. They

  • progress annually on the main pay scale
  • cross the threshold onto the upper pay scale at the earliest opportunity
  • progress to U3
  • have a five-year career break
  • return to full-time teaching on U3 and are also awarded a TLR, and remain at that pay point for the rest of their career
  • retire at 65* and draw their pension benefits.

The teacher is 32 on 1 April 2012 and therefore does not receive transitional protection.

When they join the proposed new CARE scheme, which is implemented in 2015, they have accumulated 10 years pension service in the current final salary 80th scheme, which is protected and payable at age 60.

Pension benefits under the proposed 57th CARE scheme with a normal pension age of 68
Pension earned from 2015 £40,166**
Pension earned before 2015 £9,980
Total annual pension £50,146
Protected accumulated lump sum*** £29,941
Total converted pension £52,641
Pension benefits that would have accrued under the current 80th Final Salary scheme with a normal pension age of 60
Annual pension £35,929
One-off tax-free lump sum***

£107,788

Total converted pension £44,911

* Teachers with a normal pension age of 68 who access their pension benefits three years early at age 65 will be subject to a reduction factor of 0.91.

** In this particular case study, if the member waited until their normal retirement age of 68, there would be no reduction for early payment and the pension payable would be £38,155pa.

Principles:

In order to provide the case studies on this page, we used the following principles. 

  • *** To allow easy comparison the lump sum has been converted into pension at a rate of £12 of lump sum for £1 of pension. This is the same conversion rate used for schemes which do not offer an automatic lump sum to convert pension into lump sum.

  • Salaries have increased by 2.0% per year from 2015 based on current salary scales.

  • Salaries for the 57th schemes have been revalued by CPI + 1.6% for use in the career average calculation. (We have assumed CPI at 2.0%).

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