Glasgow Local Association Glasgow Local Association Scottish Teachers’ Scottish Teachers’ PensionsPensions

27 February 201527 February 2015

Drew MorriceDrew Morrice

BackgroundBackground

Teachers’ Pension Scheme Reforms Teachers’ Pension Scheme Reforms 20072007

The Independent Review of Public The Independent Review of Public Sector PensionsSector Pensions

Pensions Act 2013Pensions Act 2013

Scottish Teachers’ Scottish Teachers’ Superannuation/Pension Superannuation/Pension

SchemeScheme Defined benefit occupational pension Defined benefit occupational pension

scheme, scheme, Administered by the Scottish Public Administered by the Scottish Public

Pensions Agency (SPPA) for EmployersPensions Agency (SPPA) for Employers Notional FundNotional Fund Underwritten by GovernmentUnderwritten by Government

1 April 20151 April 2015

Final Salary SchemeFinal Salary Scheme

replaced with a replaced with a

Career Average Revalued EarningsCareer Average Revalued Earnings

(CARE) Scheme(CARE) Scheme

Remain in Current Scheme Remain in Current Scheme if within 10 years of Normal if within 10 years of Normal

Pension Age (NPA)Pension Age (NPA)at 1 April 2012 at 1 April 2012

60 if commenced before 1 April 200760 if commenced before 1 April 2007 65 if commenced on or after 1 April 65 if commenced on or after 1 April

20072007 Tapered Protection if within 13.5 years Tapered Protection if within 13.5 years

of NPAof NPA You transfer to CARE scheme at a You transfer to CARE scheme at a

later datelater date

SPPA will write to:SPPA will write to:

Non Protected – mid MarchNon Protected – mid March Tapered – mid March indicating Tapered – mid March indicating

transfer datetransfer date Protected – mid AprilProtected – mid April Preserved – mid June Preserved – mid June

What are the benefits?What are the benefits?

Pension or Pension and Tax Free Pension or Pension and Tax Free Lump Sum at retirementLump Sum at retirement

Death in Service Benefits (from Day Death in Service Benefits (from Day 1)1)

Widow(ers)’ and Family BenefitsWidow(ers)’ and Family Benefits Flexible Retirement Options Flexible Retirement Options

Family BenefitsFamily Benefits

Death in service grant – 3 times Death in service grant – 3 times pensionable salarypensionable salary

Widow’s and children’s pensions based Widow’s and children’s pensions based on service from April 1972on service from April 1972

Widower’s and Civil Partner’s pensions Widower’s and Civil Partner’s pensions based on service from April 1988based on service from April 1988

Surviving Nominated Partner’s pensions Surviving Nominated Partner’s pensions based on service from April 2007based on service from April 2007

Benefit CalculationBenefit Calculation(NPA 60)(NPA 60)

Pension = Pensionable Service x Pension = Pensionable Service x Pensionable Salary/80Pensionable Salary/80

22 years 45 days x £35,000/8022 years 45 days x £35,000/80 = £9,678= £9,678 Lump Sum = 3 x PensionLump Sum = 3 x Pension = £29,034= £29,034

Commutation of PensionCommutation of Pension(NPA 60)(NPA 60)

Give up part of pension in return for Give up part of pension in return for larger tax free lump sumlarger tax free lump sum

Maximum allowable 19.64% of pensionMaximum allowable 19.64% of pension For every £1 surrendered get £12For every £1 surrendered get £12 Pension £9,678 Lump Sum £29,034Pension £9,678 Lump Sum £29,034 OrOr Pension £7,778 Lump Sum £51,834 Pension £7,778 Lump Sum £51,834

Benefit CalculationBenefit Calculation(NPA 65)(NPA 65)

Pension = Pensionable Service x Pension = Pensionable Service x Pensionable Salary/60Pensionable Salary/60

No automatic lump sumNo automatic lump sum 22 years 45 days x £35,000/6022 years 45 days x £35,000/60 = £12,905= £12,905

Commutation of PensionCommutation of Pension(NPA 65)(NPA 65)

Give up part of pension in return for Give up part of pension in return for larger tax free lump sumlarger tax free lump sum

Maximum allowable 35.71% of pensionMaximum allowable 35.71% of pension For every £1 surrendered get £12For every £1 surrendered get £12 Pension £12,905Pension £12,905 OrOr Pension £8,297 Lump Sum £55,296Pension £8,297 Lump Sum £55,296

Pensionable SalaryPensionable Salary

Pensionable salary received in last 12 Pensionable salary received in last 12 months before retirement; ormonths before retirement; or

The average of the best 3 consecutive The average of the best 3 consecutive years in the last 10 years revalued by years in the last 10 years revalued by CPI; CPI;

butbut Excessive salary increases in last 3 years will Excessive salary increases in last 3 years will

be limited to 10% above substantive salarybe limited to 10% above substantive salary

Best 3 years in last 10 yearsBest 3 years in last 10 years(Point 6 on Maingrade Scale)(Point 6 on Maingrade Scale)

2005/06 £30,399 1.3021 £39,582 2005/06 £30,399 1.3021 £39,582 2006/07 £31,008 1.2568 £38,970 2006/07 £31,008 1.2568 £38,970 2007/08 £31,759 1.2097 £38,419 £38,9912007/08 £31,759 1.2097 £38,419 £38,991 2008/09 £32,583 1.1521 £37,538 £38,3092008/09 £32,583 1.1521 £37,538 £38,309 2009/10 £33,399 1.1521 £38,478 £38,1452009/10 £33,399 1.1521 £38,478 £38,145 2010/11 £34,200 1.1174 £38,215 £38,0772010/11 £34,200 1.1174 £38,215 £38,077 2011/12 £34,200 1.0622 £36,327 £37,6732011/12 £34,200 1.0622 £36,327 £37,673

When Can I Retire?When Can I Retire?

From age 60/65 without any From age 60/65 without any reduction in benefitsreduction in benefits

Must leave scheme at age 75 but not Must leave scheme at age 75 but not teachingteaching

Maximum pensionable service is 45 Maximum pensionable service is 45 years at age 75years at age 75

Retirement OptionsRetirement Options Actuarially Reduced PensionActuarially Reduced Pension

from age 55from age 55 Premature Retirement CompensationPremature Retirement Compensation

on efficiency grounds from age 55on efficiency grounds from age 55 Winding Down SchemeWinding Down Scheme

Part time working but eligibility criteriaPart time working but eligibility criteria Phased RetirementPhased Retirement

from age 55 can access some benefits whilst from age 55 can access some benefits whilst working part timeworking part time

Actuarially Reduced PensionActuarially Reduced Pension Employer can withhold permission Employer can withhold permission

for up to 6 monthsfor up to 6 months Reduction in pension and lump sum Reduction in pension and lump sum

is for lifeis for life Percentage reduction dependent on Percentage reduction dependent on

age in years and monthsage in years and months Can return to teach, rejoin STSS and Can return to teach, rejoin STSS and

no earnings restrictionno earnings restriction

Premature Retirement Premature Retirement Compensation SchemeCompensation Scheme

Actuarially Reduced element payable by Actuarially Reduced element payable by SPPASPPA

Mandatory Compensation payable by Mandatory Compensation payable by EmployerEmployer

Discretionary Enhancement payable by Discretionary Enhancement payable by EmployerEmployer

Can return to teach and rejoin scheme Can return to teach and rejoin scheme but earnings limits – abatement of but earnings limits – abatement of pensionpension

Winding Down SchemeWinding Down Scheme

From Age 56/61From Age 56/61 25 years teaching service last 10 full time25 years teaching service last 10 full time Minimum contract 0.5 fteMinimum contract 0.5 fte Maximum period in scheme 4 yearsMaximum period in scheme 4 years Pensionable salary calculated on 365 days Pensionable salary calculated on 365 days

before winding down but revalued by CPIbefore winding down but revalued by CPI Must be with agreement of EmployerMust be with agreement of Employer

Phased RetirementPhased Retirement

Facility to remain in current post, work Facility to remain in current post, work part time and draw down pensionpart time and draw down pension

Must be aged 55 or overMust be aged 55 or over Must reduce salary by at least 20% Must reduce salary by at least 20% Can access up to 75% of accrued benefits Can access up to 75% of accrued benefits

- actuarially reduced if under age 60- actuarially reduced if under age 60 Can draw down pension on two occasions Can draw down pension on two occasions

before formal retirement datebefore formal retirement date

After RetirementAfter Retirement

Lump Sum is tax freeLump Sum is tax free Pension is taxed at appropriate rate Pension is taxed at appropriate rate

after deduction of personal allowanceafter deduction of personal allowance Return to teaching there is a limit to Return to teaching there is a limit to

the amount you can earn unless on the amount you can earn unless on ARP groundsARP grounds

Increasing BenefitsIncreasing Benefits

Additional Voluntary ContributionsAdditional Voluntary Contributions Return dependant on stock marketReturn dependant on stock market

Additional Pension BenefitsAdditional Pension Benefits Blocks of £250Blocks of £250 Cost dependant on ageCost dependant on age Lump sum or monthly deductionLump sum or monthly deduction

APB £250 ComparisonAPB £250 Comparison

Age 45Age 45

£3,110 by lump sum or £93.20/month for 3 £3,110 by lump sum or £93.20/month for 3 yearsyears

Age 55Age 55

£4,110 by lump sum or £124.10/month for 3 £4,110 by lump sum or £124.10/month for 3 yearsyears

ContributionsContributions(from 1/4/15)(from 1/4/15)

Employee ContributionEmployee Contribution Up to £25,999 – 7.2%Up to £25,999 – 7.2% £26,000 - £34,999 – 8.7%£26,000 - £34,999 – 8.7% £35,000 - £41,499 – 9.7%£35,000 - £41,499 – 9.7% £41,500 – £54,999 – 10.4%£41,500 – £54,999 – 10.4% £55,000 - £74,999 – 11.5%£55,000 - £74,999 – 11.5% £75,000 + - 11.9%£75,000 + - 11.9%

Employer ContributionEmployer Contribution 17.2% of Salary (from 1/9/15)17.2% of Salary (from 1/9/15)

STPS 2015STPS 2015

New Career Average Revalued Earnings New Career Average Revalued Earnings (CARE) Scheme from 1 April 2015(CARE) Scheme from 1 April 2015

Retirement Age linked to State Pension Retirement Age linked to State Pension AgeAge

Age 50/55 or over at 1 April 2012 Age 50/55 or over at 1 April 2012 remain in current arrangementremain in current arrangement

Tapered protection if over 46.5/51.5 at Tapered protection if over 46.5/51.5 at 1 April 20121 April 2012

STPS 2015 STPS 2015

Change will apply to future service – Change will apply to future service – what you have accrued you keepwhat you have accrued you keep

Tiered Contributions on actual salaryTiered Contributions on actual salary If transferred to new scheme you can If transferred to new scheme you can

retire at NPA 60/65 and leave post 2015 retire at NPA 60/65 and leave post 2015 service until new pension ageservice until new pension age

Cost Ceiling for Employer ContributionsCost Ceiling for Employer Contributions Improved Scheme GovernanceImproved Scheme Governance

CARE AccrualCARE Accrual

1/57 + CPI (2%) + 1.6%1/57 + CPI (2%) + 1.6% Salary 1/57 CPI +1.6% PensionSalary 1/57 CPI +1.6% Pension £34,000 £596.49 1.1519 £687.10£34,000 £596.49 1.1519 £687.10 £34,500 £605.26 1.1119 £672.99£34,500 £605.26 1.1119 £672.99 £35,000 £614.03 1.0733 £659.04£35,000 £614.03 1.0733 £659.04 £35,500 £622.80 1.0360 £645.22£35,500 £622.80 1.0360 £645.22 £36,000 £631.57 1.0000 £631.57£36,000 £631.57 1.0000 £631.57 Total £3,295.91 Total £3,295.91

Other OptionsOther Options

Purchase faster accrual for a Purchase faster accrual for a particularparticular

Year. Decide in April – 1/45, 1/50 or Year. Decide in April – 1/45, 1/50 or 1/551/55

Buy out actuarial reduction if NPA 66 Buy out actuarial reduction if NPA 66 or higher for years after 65. Need to or higher for years after 65. Need to decide within 6 months of joining decide within 6 months of joining

Any QuestionsAny Questions