2015 Teachers’ Pension Scheme changes
Prior to the changes to the Teachers’ Pension Scheme in 2015, all members were part of the final salary scheme. Some still are, but we’ll discuss that shortly.
As part of the final salary scheme, benefits are based on your length of service and an average salary that’s determined when you retire. Your ‘average salary’ is calculated as your last 12 months of pensionable salary before your retirement, or the average of your best consecutive three years re-valued salaries in your last ten years of service, whichever is higher.
Introducing the career average arrangement
In 2015 a new career average arrangement scheme was introduced, and members of the existing final salary scheme were moved dependant on their member type.
Your pension in this scheme is calculated as a percentage of your pensionable salary for every tax year you contribute to the Teachers’ Pension Scheme, plus a percentage to account for inflation.
You can collect your pension as early as 55, thought your NPA is 65 or your state pension age, whichever is higher.
This may seem a little difficult to get your head around, especially when you realise that you can have benefits in both schemes. If you’ve been moved from final salary to career average, you’ll receive the benefits you’ve built up in both schemes.
The four member types
With the introduction of the career average scheme came the introduction of new member types. These member types determine the benefits you’ll receive at retirement, and when you can collect your pension. They’re based on when you joined the Teachers’ Pension Scheme and how close to normal retirement age you were on 1st April 2012. Let’s break them down.
- If you joined (or join) the Teachers’ Pension Scheme after 1st April 2015, you’ll automatically be enrolled in career average arrangement. You’re classed as a ‘New Member’.
- If you were an active member of the scheme on 31st March 2012 and were within 10 years of your NPA on 1st April 2012, either 60 or 65, you’ll remain in final salary scheme. You’re classed as a ‘Protected Member’.
- If you were an active member of the scheme on 1st April 2012 and were within 10 to 13 years and 5 months of your NPA on that date, you’ll remain in final salary for a tapered period of time. You’ll then move into career average arrangement. You’re classed as a ‘Tapered Member’.
- If you were an active member on 31st March 2012, but more than 13 years and 5 months away from your NPA on that date, you’ll be in the career average arrangement. You’re classed as a ‘Transition Member’.
The McCloud Judgement
A recent ruling, known as the McCloud judgement, has found the protections introduced in 2015 to be discriminatory against younger members of the public sector pensions schemes including the TPS. As a result, members who were in service before 31st March 2012 and on or after 1st April 2015 (including those who’ve taken their pension benefits since 1st April 2015), may now get the option to decide which scheme they accrue benefits for the period between 2015 and 2022.
This includes those who have retired since April 2015 and deferred members returning within 5 years.
From 1st April 2022, it is proposed that all active members of the Teachers’ Pension Scheme who continue as active members of the TPS, will be moved into the career average (reformed) scheme.
Following consultation, it’s been decided that members will be asked to make their choice when they access their benefits. This approach, known as ‘Deferred Choice Underpin (DCU)’, allows members to make a choice based on their actual career and a known retirement date.