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Glasgow Local Association Scottish Teachers’ Pensions

Glasgow Local Association Scottish Teachers’ Pensions. 27 February 2015 Drew Morrice. Background. Teachers’ Pension Scheme Reforms 2007 The Independent Review of Public Sector Pensions Pensions Act 2013. Scottish Teachers’ Superannuation/Pension Scheme.

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Glasgow Local Association Scottish Teachers’ Pensions

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  1. Glasgow Local Association Scottish Teachers’ Pensions 27 February 2015 Drew Morrice

  2. Background • Teachers’ Pension Scheme Reforms 2007 • The Independent Review of Public Sector Pensions • Pensions Act 2013

  3. Scottish Teachers’ Superannuation/Pension Scheme • Defined benefit occupational pension scheme, • Administered by the Scottish Public Pensions Agency (SPPA) for Employers • Notional Fund • Underwritten by Government

  4. 1 April 2015 Final Salary Scheme replaced with a Career Average Revalued Earnings (CARE) Scheme

  5. Remain in Current Scheme if within 10 years of Normal Pension Age (NPA)at 1 April 2012 • 60 if commenced before 1 April 2007 • 65 if commenced on or after 1 April 2007 • Tapered Protection if within 13.5 years of NPA • You transfer to CARE scheme at a later date

  6. SPPA will write to: • Non Protected – mid March • Tapered – mid March indicating transfer date • Protected – mid April • Preserved – mid June

  7. What are the benefits? Pension or Pension and Tax Free Lump Sum at retirement Death in Service Benefits (from Day 1) Widow(ers)’ and Family Benefits Flexible Retirement Options

  8. Family Benefits • Death in service grant – 3 times pensionable salary • Widow’s and children’s pensions based on service from April 1972 • Widower’s and Civil Partner’s pensions based on service from April 1988 • Surviving Nominated Partner’s pensions based on service from April 2007

  9. Benefit Calculation(NPA 60) • Pension = Pensionable Service x Pensionable Salary/80 • 22 years 45 days x £35,000/80 • = £9,678 • Lump Sum = 3 x Pension • = £29,034

  10. Commutation of Pension(NPA 60) • Give up part of pension in return for larger tax free lump sum • Maximum allowable 19.64% of pension • For every £1 surrendered get £12 • Pension £9,678 Lump Sum £29,034 • Or • Pension £7,778 Lump Sum £51,834

  11. Benefit Calculation(NPA 65) • Pension = Pensionable Service x Pensionable Salary/60 • No automatic lump sum • 22 years 45 days x £35,000/60 • = £12,905

  12. Commutation of Pension(NPA 65) • Give up part of pension in return for larger tax free lump sum • Maximum allowable 35.71% of pension • For every £1 surrendered get £12 • Pension £12,905 • Or • Pension £8,297 Lump Sum £55,296

  13. Pensionable Salary • Pensionable salary received in last 12 months before retirement; or • The average of the best 3 consecutive years in the last 10 years revalued by CPI; • but • Excessive salary increases in last 3 years will be limited to 10% above substantive salary

  14. Best 3 years in last 10 years(Point 6 on Maingrade Scale) • 2005/06 £30,399 1.3021 £39,582 • 2006/07 £31,008 1.2568 £38,970 • 2007/08 £31,759 1.2097 £38,419 £38,991 • 2008/09 £32,583 1.1521 £37,538 £38,309 • 2009/10 £33,399 1.1521 £38,478 £38,145 • 2010/11 £34,200 1.1174 £38,215 £38,077 • 2011/12 £34,200 1.0622 £36,327 £37,673

  15. When Can I Retire? • From age 60/65 without any reduction in benefits • Must leave scheme at age 75 but not teaching • Maximum pensionable service is 45 years at age 75

  16. Retirement Options • Actuarially Reduced Pension • from age 55 • Premature Retirement Compensation • on efficiency grounds from age 55 • Winding Down Scheme • Part time working but eligibility criteria • Phased Retirement • from age 55 can access some benefits whilst working part time

  17. Actuarially Reduced Pension • Employer can withhold permission for up to 6 months • Reduction in pension and lump sum is for life • Percentage reduction dependent on age in years and months • Can return to teach, rejoin STSS and no earnings restriction

  18. Premature Retirement Compensation Scheme • Actuarially Reduced element payable by SPPA • Mandatory Compensation payable by Employer • Discretionary Enhancement payable by Employer • Can return to teach and rejoin scheme but earnings limits – abatement of pension

  19. Winding Down Scheme • From Age 56/61 • 25 years teaching service last 10 full time • Minimum contract 0.5 fte • Maximum period in scheme 4 years • Pensionable salary calculated on 365 days before winding down but revalued by CPI • Must be with agreement of Employer

  20. Phased Retirement • Facility to remain in current post, work part time and draw down pension • Must be aged 55 or over • Must reduce salary by at least 20% • Can access up to 75% of accrued benefits - actuarially reduced if under age 60 • Can draw down pension on two occasions before formal retirement date

  21. After Retirement • Lump Sum is tax free • Pension is taxed at appropriate rate after deduction of personal allowance • Return to teaching there is a limit to the amount you can earn unless on ARP grounds

  22. Increasing Benefits • Additional Voluntary Contributions • Return dependant on stock market • Additional Pension Benefits • Blocks of £250 • Cost dependant on age • Lump sum or monthly deduction

  23. APB £250 Comparison • Age 45 • £3,110 by lump sum or £93.20/month for 3 years • Age 55 • £4,110 by lump sum or £124.10/month for 3 years

  24. Contributions(from 1/4/15) • Employee Contribution • Up to £25,999 – 7.2% • £26,000 - £34,999 – 8.7% • £35,000 - £41,499 – 9.7% • £41,500 – £54,999 – 10.4% • £55,000 - £74,999 – 11.5% • £75,000 + - 11.9% • Employer Contribution • 17.2% of Salary (from 1/9/15)

  25. STPS 2015 • New Career Average Revalued Earnings (CARE) Scheme from 1 April 2015 • Retirement Age linked to State Pension Age • Age 50/55 or over at 1 April 2012 remain in current arrangement • Tapered protection if over 46.5/51.5 at 1 April 2012

  26. STPS 2015 • Change will apply to future service – what you have accrued you keep • Tiered Contributions on actual salary • If transferred to new scheme you can retire at NPA 60/65 and leave post 2015 service until new pension age • Cost Ceiling for Employer Contributions • Improved Scheme Governance

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

  28. Other Options • Purchase faster accrual for a particular • Year. Decide in April – 1/45, 1/50 or 1/55 • Buy out actuarial reduction if NPA 66 or higher for years after 65. Need to decide within 6 months of joining

  29. Any Questions

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