Proposed Teachers' Pension Scheme: FAQs

March 2012

These FAQs help to explain how the proposed new Teachers' Pension Scheme (TPS) will operate.

Those members who are within 10 years of their normal pension age at 1 April 2012 will not join the new TPS and should read carefully the section on transitional protection further on in this document.

Negotiations

Membership of the new Teachers' Pension Scheme

Pre-April 2015 service

Contribution rates

Accrual rates

Final salary

Career Average Revalued Earnings (CARE) scheme

Retirement age

Actuarial factors

Lump sum

Re-employment after retirement

Dependants' benefits

Transitional protection

This section is only for those members who are within 10 years of their normal pension age at 1 April 2012

Tapered protection

This section is only for those members who are within between 10 and 13.5 years of their current normal pension age at 1 April 2012

Negotiations

Have the negotiations finished on the new Teachers' Pension Scheme?

The government published the main principles of the new Teachers' Pension Scheme on 9 March 2012. ATL, along with the other unions, will now enter detailed technical discussions with the government on the design of the new scheme as there are still decisions to be made on how the scheme will operate in practice. We expect these discussions to last for the remainder of the year.

Membership of the new Teachers' Pension Scheme

When will the new TPS come into effect?

The new pension scheme will come into effect on 1 April 2015.

Will I automatically be entered into the new pension scheme?

Most members of the current TPS will be automatically transferred into the new TPS. There will be no requirement to apply to join the new TPS.

If you are within 10 years of your current scheme's normal pension age as at 1 April 2012, you will not join the new scheme and are entitled to transitional protection. If you qualify for transitional protection, please ensure you read the 'transitional protection' section at the end of these FAQs.

If you are between 10 and 13.5 years of your current scheme's normal pension age as at 1 April 2012 you will be entitled to tapered protection and will transfer to the new TPS at a later date. If you qualify for tapered protection, please ensure you read the 'tapered protection' section at the end of these FAQS.

Protection for those within 13.5 years of retirement was a significant concession made by the government. Prior to this concession their intention was that all members of the TPS would join the new scheme on 1 April 2015 no matter how close to retirement they were.

The cost of the transitional protection is being met by government and does not constitute part of the cost ceiling for the TPS. This represents a significant increase in the value of the scheme previously offered.

I am not currently in the TPS but am planning on returning to work after April 2015. Which scheme will I join?

You will join the new TPS on your return to work. However, if you are within 13.5 years of your normal pension age and return to work within five years of leaving the scheme, you will be entitled to either transitional or tapered protection.

I am not currently in the TPS but am planning on returning to work before April 2015. Which scheme will I join?

If you have service prior to 1 January 2007 and your break in service is less than five years, you will rejoin the TPS with a normal pension age of 60. Unless you are entitled to transitional or tapered protection, you will join the new TPS on 1 April 2015.

If you first joined the TPS after 1 January 2007, or you have had a break of more than five years, you will join the TPS with a normal pension age of 65. Unless you are entitled to transitional or tapered protection, you will join the new TPS on 1 April 2015.

I work in the independent sector. Will I be eligible for membership of the new TPS?

The government has confirmed that independent schools which currently offer the TPS will be able to continue to do so. This means that existing and future teachers at independent schools which offer the TPS will be able to join the new scheme on the same basis as for teachers in the maintained sector.

If you work in the independent sector and are eligible for transitional or tapered protection, then this will be given to you on the same basis as for teachers in the maintained sector.

Pre-April 2015 service

What happens to the service that I have in the TPS before 1 April 2015?

Your pre-April 2015 service will be preserved in the TPS. You will retain your existing accrual rate and retirement age and your benefits will be based on your final salary for this element of your pensionable service.

How will my pension benefits from my pre-2015 service be calculated?

Your pension benefits will be based on the amount of service that you have prior to 1 April 2015. For each year of service you will receive 1/80th (or 1/60th for those who joined the TPS after 1 January 2007) of your final average salary as a pension. Your final average salary will be the better of either:

  • the last consecutive 365 days before you retire or

  • the average of the best consecutive three years' salary in the 10 years before you retire.

If your benefits are not calculated on your last 365 days before you retire, then the salary used to calculate your benefits will be revalued by the Consumer Price Index (CPI).

Teachers' Pensions will automatically use the best pensionable salary to calculate your pension benefits.

Will I be entitled to receive a tax free lump sum on my pre-2015 service?

If you joined the TPS before 1 January 2007 you will also be entitled to a lump sum equivalent to 3/80ths of your final average salary for each year of pre-2015 service.

There is no automatic lump sum payable to those teachers who joined the TPS after 1 January 2007. There is no automatic lump sum for service in the new TPS.

Members of all schemes will be able to convert part of their pension for a lump sum. For every £1 of pension converted you will receive £12 by way of a tax free lump sum. HM Revenue and Customs limits apply to the amount of pension you can convert into a lump sum.

Will my pension benefits from my pre-2015 service be based on my salary at my final retirement date or on my salary at 2015?

Your pension benefits will be based on the final salary at retirement not on your salary up to 1 April 2015.

Can I take my pension benefits accrued pre-April 2015 at a different time to any service in the new scheme?

Yes. You can access your pre-April 2015 pension benefits at any time after your 55th birthday. However, you must have resigned from your post and be out of teaching for these benefits to be payable.

If you take your pension benefits before your normal pension age then these benefits will be actuarially reduced. If you subsequently return to teaching the amount that you can earn without affecting your pension may be limited. If your benefits are actuarially reduced your future earnings will not be limited.

If I work past my normal pension age will I receive any enhancements to my benefits?

If you joined the TPS before 1 January 2007 there is no enhancement for working beyond your normal pension age of 60. If you joined the TPS after 1 January 2007 you are entitled to enhancement of your benefits if you work beyond your normal pension age of 65.

It is proposed that if a teacher delays retiring from the post-2015 scheme to after the normal pension age some form of compensation for late payment of pension benefits will be applied.

Contribution rates

Will I have to pay the increased pension contributions?

Yes. All members of the TPS with a full-time equivalent salary of over £14,999 will have to pay the increased contributions.

How much will I pay in pension contributions?

Pension contributions will be tiered and you will pay the appropriate percentage for your full-time equivalent salary from April 2012. Members of the TPS currently pay 6.4%.

Full-time salary range Contribution rate in 2012/13 Increase against 6.4%
Up to £14,999 6.4% 0.0%
£15,000 to £25,999 7.0% 0.6%
£26,000 to £31,999 7.3% 0.9%
£32,000 to £39,999 7.6% 1.2%
£40,000 to £74,999 8.0% 1.6%
£75,000 to £111,999 8.4% 2.0%
£112,000 and above 8.8% 2.4%

I work part time. How will my pension contributions be calculated?

Your pension contribution rate will be based on your full-time equivalent salary. Teachers' Pensions will use your full-time equivalent salary to calculate your pension benefits at retirement. You will be credited with pro-rata reckonable service.

Will there be further increases in pension contributions?

The government has planned further increases in April 2013 and 2014. The intention is that all teachers earning £15,000 a year or more will pay an average of an additional 3.2% in pension contributions. How these planned increases will be implemented in 2013 and 2014 will be subject to further negotiation.

Accrual rates

What is the accrual rate?

The accrual rate is the proportion of your pensionable salary used in the calculation of your pension benefits.

In the new scheme the accrual rate is 1/57th. This means that for every year of service in the TPS you will receive 1/57th of your pensionable salary as a pension.

The accrual rate of 1/57th is a significant improvement on the offer made by the government in November 2011. In the reference scheme issued in October the accrual rate was 1/65th. The government had previously modelled accrual rates of between 1/80th and 1/100th.

Will my accrual rate change?

The new TPS will have an accrual rate of 1/57th and so your accrual rate will change for your service after 1 April 2015.

If you joined the TPS before 1 January 2007 your current accrual rate is 1/80th. If you joined the TPS after 1 January 2007 your current accrual rate is 1/60th.

Final salary

What is a final salary scheme?

Currently your benefits from the TPS are based on your final salary. Benefits accrued before 1 April 2015 will be calculated using your final salary.

How is the final salary calculated?

Your final salary will be calculated in one of two ways, either:

  • the last consecutive 365 days before you retire

  • the average of the best consecutive three years salary in the 10 years before you retire.

If your benefits are not calculated on your last 365 days before you retire then the salary used to calculate your benefits will be revalued to keep your benefits in line with inflation.

Teachers' Pensions will automatically use the best pensionable salary to calculate your pension benefits.

Career Average Revalued Earnings (CARE) scheme

What is a career average scheme?

Benefits in the new scheme will be based on the average salary you have earned throughout your whole career. For every year of service in the TPS you will add 1/57th of the salary earned in that year to your pension. This will be revalued to keep it in line with inflation.

How is the career average salary calculated?

The career average salary is calculated by using all of your full-time equivalent salaries after 1 April 2015 (or the date you transfer to the new scheme if later) and the amount of time that you spend on each salary. The average of all of these salaries is then used to calculate your pension benefits.

Below is an example of the career average salary for a teacher over a five-year period. In this example the teacher has two periods of acting in a higher paid post from 1 April to 31 August 2017 and from 1 September 2018 to 31 August 2019.

Date range Pay rate Actual pay
01.09.15 to 31.08.16 365 days @ £26,000 £26,000
01.09.16 to 31.03.17 212 days @ £26,500 £15,392
01.04.17 to 31.08.17 153 days @ £29,000 £12,156
01.09.17 to 31.08.18 365 days @ £26,500 £26,500
01.09.18 to 31.08.19 365 days @ £30,000 £30,000
01.09.19 to 31.12.19 122 days @ £31,000 £10,362
01.01.20 to 31.08.20 243 days @ £27,000 £17,975
Totals 1825 days £138,385

£138,385 ÷ 5 years = career average salary of £27,676.99

All earnings would be revalued to keep them in line with inflation. Salaries are revalued by the appropriate factor at the date of the change in salary. (Please note that the above example does not include any revaluation.)

What part of my pension will be based on my career average earnings?

Career average earnings will only be used for service you have in the new scheme after 1 April 2015. All service accrued prior to 1 April 2015 will retain a link to your final salary.

If you have transitional protection, none of your pension benefits will be based on your career average salary. If you have tapered protection you will join the new scheme at a later date and it is only benefits based on service accrued after this date which will be calculated with reference to your career average salary.

What factor is used for the revaluation of earnings?

For the purpose of calculating your pensionable salary your previous salaries will be increased in line with the Consumer Prices Index (CPI). Whilst you are in service your benefits are increased in line with CPI plus 1.6%. If you are out of service when you access your benefits, your previous salaries will be increased in line with CPI.

The additional 1.6% above inflation was negotiated to help ensure that your pension benefits keep track with increases in teachers' salaries.

Lord Hutton's independent review of public sector pensions recommended that, under a CARE scheme, previous earnings were revalued in line with the average increase in earnings. The revaluation of CPI + 1.6% represents a significant improvement on this recommendation.

Since April 2011, following the government's decision to move from using the Retail Price Index (RPI), salaries used to calculate final salary pensions have been revalued in line with CPI. As RPI has generally been higher than CPI, ATL remains opposed to this change in the measure of inflation used in the calculation of pension benefits.

Once in payment, will my pension be increased to keep it in-line with inflation?

Yes, pensions in payment are index linked. Your pension will increase every April. Your pension increase will be based on the rate of CPI in the preceding September.

Retirement age

At what age can I access my pension benefits?

All members of the TPS can access their pension benefits at any time after their 55th birthday. Pensions accessed before your normal pension age will be actuarially reduced. The reduction will be calculated with reference to your age in years and months when you access your benefits. The closer you are to your normal pension age, the smaller the reduction in your benefits. Any reduction in benefits is permanent.

If you retire between your 65th birthday and your normal pension age, if and when that is higher, the reduction will be more favourable than the normal actuarial reduction. This makes retiring at 65 more financially viable, therefore somewhat mitigating the increase in normal retirement age. The introduction of more favourable early retirement factors from age 65 onwards is a further negotiated improvement from the proposed changes suggested by the government in November 2011. See the section on actuarial factors.

What will be my normal pension age?

Your normal pension age is the earliest age at which you can access your benefits in full.

  • For members who joined the TPS before 1 January 2007 your normal pension age is currently age 60 on your service until 1 April 2015.

  • For members who joined the TPS after 1 January 2007 your normal pension age is currently age 65 on your service until 1 April 2015.

  • For members with service in the new scheme, all service accrued after 1 April 2015 will have a normal pension age equal to your state retirement age or age 65, whichever is the higher.

You can check your state retirement age online at the direct.gov website. Please note that the government is considering making changes to the state retirement age. If your state pension age changes, then your normal pension age for the TPS will change to match it.

Members with transitional protection retain their current normal pension age.

Members with tapered protection will retain their current normal pension age for a period after 1 April 2015 until they join the new TPS – see the section on tapered protection for details.

Actuarial factors

How will my pension be affected if I leave before my normal pension age?

Members who wish to access their pension benefits before their normal pension age can do so but their pension benefits are reduced. The amount of the reduction is determined by the Government Actuary and is designed to ensure that neither the scheme nor the member suffers a loss for taking early payment of their benefits. The usual actuarial factor for teachers is around 5% per year.

The proposed new pension scheme will have a more beneficial actuarial factor (the amount your pension is reduced) of 3% for the years between 65 and 68. So if you decide to retire at age 65 your benefits will be reduced by 3% if your normal pension age is 66; by 6% if your normal pension age is 67; and by 9% if your normal pension age is 68.

These more beneficial factors, coupled with the improved accrual rate, should make it financially easier for teachers to retire before their normal pension age.

You do not have to take your pension immediately if you leave the scheme before your normal pension age. You can leave your benefits preserved in the TPS and access them at any time after your 55th birthday.

Lump sum

Will I receive an automatic lump sum when I retire?

If you joined the TPS before 1 January 2007 you will receive an automatic lump sum when you retire. This will be calculated on 3/80th of your pensionable salary for each year of service you have in this scheme.

Members who joined the TPS after 1 January 2007 will not receive an automatic lump sum.

Service within the new scheme after 1 April 2015 will not attract an automatic lump sum.

Can I convert some of my annual pension into a lump sum?

All members of the TPS can convert some of their pension into lump sum. For each £1 of pension surrendered you will receive a tax-free lump sum of £12. The reduction in your pension is permanent. HM Revenue and Customs regulations restrict the amount of pension that you can convert into lump sum.

Re-employment after retirement

What happens if I return to teaching after drawing my pension benefits?

If you return to teaching after drawing your benefits you will automatically be entered into the new TPS. If you have benefits from the NPA60 or NPA65 schemes you will be limited as to how much you can earn whilst still receiving your pension. If you only have benefits from the new Scheme or take your benefits actuarially reduced then there will be no limit to the amount you can earn.

Dependants' benefits

Under the new scheme, will my dependants still receive a pension?

Dependants' benefits for widows and widowers will still be payable from the new TPS. There is broadly no change to dependants' benefits.

Transitional protection

This section is only for those members who are within 10 years of their normal pension age at 1 April 2012.

Who receives transitional protection?

Members who are within 10 years of their normal pension age as at 1 April 2012 will receive transitional protection. For teachers with a normal pension age of 60 this means those that were born before 1 April 1962. For those teachers with a normal pension age of 65 this means those that were born before 1 April 1967.

How does transitional protection work?

If you are entitled to transitional protection you will not join the new TPS and will therefore see no change to your pension benefits. You will:

  • retain your current normal pension age (either age 60 or 65)

  • retain your current accrual rate (either 80ths or 60ths)

  • have your pension benefits calculated with reference to your final salary calculation of the better of either your last 365 days of service or the average of the best three years within the last 10 years of service.

Will I still be entitled to transitional protection even if I work past my normal pension age?

Yes. As long as you do not access your pension benefits you will remain in your current pension scheme.

If you access your pension benefits and return to teaching all your subsequent service will be in the new scheme.

I am not currently in the TPS but am planning on returning to work after April 2015. Which scheme will I join?

If you have service in the TPS and return to teaching with less than a five-year break, you will rejoin the TPS that your previous service is in. You will retain the normal pension age and accrual rate and your final salary will be used to calculate your pension benefits.

If you are entitled to transitional protection but return to the TPS after a break of more than five years, you will join the new TPS.

Will I have to pay the increased pension contributions?

Yes, members of all schemes will have to pay increased contributions. The contribution rate will depend on the full-time equivalent salary for your post.

Can I elect to join the new scheme instead of receiving transitional protection?

No, it is not possible for you to elect to join the new scheme.

Tapered protection

This section is only for those members who are between 10 and 13.5 years of their normal pension age at 1 April 2012.

Who receives tapered protection?

Tapered protection is for those between 10 and 13.5 years of their current normal pension age as at 1 April 2012.

For teachers who joined the TPS prior to 1 January 2007 with a normal pension age of 60, this means those that were born between 1 April 1962 and 30 September 1965.

For those teachers who joined the TPS on or after 1 January 2007 with a normal pension age of 65, this means those that were born between 1 April 1967 and 30 September 1970.

How does tapered protection work?

Tapered protection will allow those eligible teachers to remain in their existing TPS past 1 April 2015. There is a sliding scale which will determine the date that you join the new TPS with reference to your age as at 1 April 2012.

How long will I remain in the existing scheme?

This will depend upon your age as at 1 April 2012.

Examples:

If you have a normal pension of 60 and are aged 49 years and 11 months on 1 April 2012 you will retain membership of your existing scheme until 1 February 2022 (when you would be 59 years and 9 months), and from that date you will start to accrue service in the new scheme.

If you have a normal pension of 60 and are aged 49 years and 10 months on 1 April 2012 you will remain in the existing scheme until 1 December 2021.

This taper would continue on a linear basis so that members who are 46 years and 7 months on 1 April 2012 remain in the existing scheme until 1 June 2015.

If you have a normal pension age of 65 and are aged between 51½ and 55 on 1 April 2012 you will remain in your current scheme on the same tapered basis as above, but all the ages quoted would be five years greater, eg a member who is 54 years and 11 months on 1 April 2012 would remain in the existing scheme until 1 February 2022.

Annex A at the bottom of this page has a chart which shows when teachers entitled to transitional protection would join the new TPS.

Will I have to join the new TPS?

All teachers with tapered protection will join the new pension scheme before their normal pension age. However, they will have more service in the pre-2015 scheme and be able to take this in full at their existing normal pension age, subject to ceasing teaching.

The tapered protection represents a significant improvement on the government's initial offer and will allow teachers with tapered protection to retire at their existing normal pension age with financially viable pension benefits.

Can I instead elect to join the new scheme earlier than the transfer date for my tapered protection?

No, it is not possible for you to elect to join the new scheme at an earlier date.

I am not currently in the TPS but am planning on returning to work after April 2015. Which scheme will I join?

If you have service in the TPS and return with less than a five-year break, you will rejoin the TPS that your previous service is in until the end of your transitional protection period.

If you are entitled to transitional protection, but return to the TPS after a break of more than five years you will join the new TPS.

Will I have to pay the increased pension contributions?

Yes, members of all schemes will have to pay the increased contributions. The contribution rate will depend on the full-time equivalent salary for your post.

Annex A: TAPERED PROTECTION
Date you will join the new Teachers' Pension Scheme based on your age as at 1 April 2012.
Current normal pension age 60 Date join new scheme Current normal pension age 65
Years Months   Years Months
46 7 01/06/2015 51 7
46 8 01/08/2015 51 8
46 9 01/10/2015 51 9
46 10 01/12/2015 51 10
46 11 01/02/2016 51 11
47 0 01/04/2016 52 0
47 1 01/06/2016 52 1
47 2 01/08/2016 52 2
47 3 01/10/2016 52 3
47 4 01/12/2016 52 4
47 5 01/02/2017 52 5
47 6 01/04/2017 52 6
47 7 01/06/2017 52 7
47 8 01/08/2017 52 8
47 9 01/10/2017 52 9
47 10 01/12/2017 52 10
47 11 01/02/2018 52 11
48 0 01/04/2018 53 0
48 1 01/06/2018 53 1
48 2 01/08/2018 53 2
48 3 01/10/2018 53 3
48 4 01/12/2018 53 4
48 5 01/02/2019 53 5
48 6 01/04/2019 53 6
48 7 01/06/2019 53 7
48 8 01/08/2019 53 8
48 9 01/10/2019 53 9
48 10 01/12/2019 53 10
48 11 01/02/2020 53 11
49 0 01/04/2020 54 0
49 1 01/06/2020 54 1
49 2 01/08/2020 54 2
49 3 01/10/2020 54 3
49 4 01/12/2020 54 4
49 5 01/02/2021 54 5
49 6 01/04/2021 54 6
49 7 01/06/2021 54 7
49 8 01/08/2021 54 8
49 9 01/10/2021 54 9
49 10 01/12/2021 54 10
49 11 01/02/2022 54 11

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