The Government has announced its decision on how to deal with age discrimination issues which have been a factor in public sector schemes since the introduction of career average pension arrangements in 2015. The issue and its solution affect pension arrangements for the vast majority of serving teachers.
What’s the issue?
The issue is age discrimination in public sector pension schemes introduced in 2015. Protections meant older members of the Teachers’ Pension Scheme (TPS) remained in the final salary scheme or delayed joining the career average scheme when younger members transferred into the career average scheme in April 2015. This was found to be unlawful.
Eligible members will get a choice between final salary scheme benefits or career average scheme benefits for the period 1 April 2015 to 31 March 2022. The option that produces the best results will be applied. Members will be expected to choose at the point of retirement. This is known as the ‘deferred choice underpin’ (DCU).
Am I affected?
If you were a member of the Teachers’ Pension Scheme on 31 March 2012 and remained in service on 1 April 2015 then this affects you.
Why are people who joined after 31 March 2012 not affected?
Because legally they would not have had the option of staying in the final salary scheme whatever their age. They would have all been moved into the career average scheme on 1 April 2015.
Will older members who thought they could stay in their final salary schemes until retirement get a choice between final salary and career average schemes for service between 1 April 2015 and 31 March 2022?
What do I need to do if I am affected and haven’t left the TPS?
Nothing at the moment. You will be contacted by the Teachers’ Pension Scheme.
This announcement means that serving teachers will be able to make a decision on their pension entitlements for the remedy period (1 April 15 – 31 March 22) near retirement with the information required available to them. You do not need to put in a legal claim to be eligible for these changes.
What do I need to do if I am affected and have left the TPS since 1 April 2015?
Nothing at the moment if you haven’t retired and taken your pension.
You will have to make a decision on your pension entitlement for the remedy period when you retire. At that stage you will have the information necessary to make a decision. You do not need to put in a legal claim to be eligible for these changes.
Are there any groups who will have to make a decision?
Yes, there are groups who will have to choose between final salary and career average benefits sooner. These are people who have left the Teachers’ Pension Scheme between 1 April 2015 and 31 March 2022 who have taken or moved their pension benefits.
These groups include retirees, people who have transferred their pension out, divorcees, those who have taken ill health retirement and death cases (their representatives in this instance). Legislative changes will be needed before these groups can make a decision.
Will teachers have to pay extra because of this decision?
The Government intends to pass the cost of fixing the age discrimination on to the Teachers’ Pension Scheme so that it is borne by employers / employees. The iniquity of making employees pay for their own compensation has been pointed out vigorously to the Department for Education and the Treasury.
Teachers were due to be receiving improvements in the TPS career average scheme from April 2019 as a result of the 2016 valuation. This was put on hold due to legal cases surrounding this age discrimination. The NEU does not believe that teachers will have to pay extra but this will be determined by a new valuation of the Teachers’ Pension Scheme.
What happens after 31 March 2022?
On the current timetable everyone will be moved into the TPS career average scheme on 1 April 2022.
What about members of the Local Government Pension Scheme?
Compensation for members in the Local Government Pension Scheme will be different owing to the different benefit structure. Everyone in the LGPS was moved into a career average scheme in 2014. Older members had the additional protection of an ‘underpin’, guaranteeing them the better of career average or their previous final salary scheme. This ‘underpin’ will be extended to all members for the period 1 April 2014 – 31 March 2022 regardless of age.