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Reform to Pension Scheme Proposals

Discussion in 'Retirement' started by diddydave, Jul 17, 2020.

  1. diddydave

    diddydave Lead commenter


    I've yet to delve deeply into these but from my first glance I think I got a few things right (engage smug mode).

    Everyone will move to Career Average from April 2022.

    The consultation asks for feedback on how the choice between which scheme you should be allowed to be in between 2015 and 2022 with the options being:
    • ASAP
    • When you retire
  2. ake

    ake New commenter

    For members with unbroken service it's probably relatively straightforward to work out which choice is financially most advantageous. I had a break in service for 6 months in 2014. Currently 50, I knew roughly how the restricted hypothetical calculation of benefits would work. Whichever option goes ahead i.e. asap or at retirement, it will be important for TPS to calculate the benefits for scheme members with breaks in service so we can make informed decisions.
  3. diddydave

    diddydave Lead commenter

    Ahh...yes...I had forgotten that there would be a group for whom the CA would be a better option, particularly IF they can choose the date at which they convert from one to the other.

    If their break would lead to a restricted hypothetical that is better than their final 'final service' calculation then all of the service after the break would add NOTHING to their pension but if it was to be counted as Career Average then it would at least add something.
  4. Bedlam3

    Bedlam3 Star commenter

    Thank you for posting this diddy.
    I've just had a quick glance - it's 74 pages long!
  5. the hippo

    the hippo Lead commenter Community helper

    I find it depressing that anyone on this TES forum is so foolish as to suggest that this might be a "reform". Forgive me if i am mistaken, but doesn't "reforming" something mean that you are making it better in some way? Does anyone really believe that the present government wants to improve pensions for teachers?
  6. Sundaytrekker

    Sundaytrekker Star commenter

    I went on strike over the pension changes in 2011. It gained us the concession of those of us within 10 years of NPA staying in the final salary scheme. At the time I was pleased that it would benefit me but also felt it was unfair on those younger. So this is reforming that situation and everyone will be better off than they might have been for those ten years till 2022. Or at least have the information to make those decisions.

    Everyone back to how it was forever? No, it’s not that but teachers pensions are still better than most.
    schoolsout4summer likes this.
  7. geraldbeattie

    geraldbeattie New commenter

    Teacher pensions may well be better than most, but they are still not as good as the one that MPs get.
    tenpast7 likes this.
  8. diddydave

    diddydave Lead commenter

    Not sure if you may have missed the history to this one hippo.

    This is the proposal on how to put right the age discrimination that the changes that were introduced back in 2015 created. The 'reform' was enacted back then and teachers (along with every public sector pension scheme) failed to prevent it - probably due in part to the 'divide-and-conquer' tactic of putting in the very transition scheme that in the end proved its undoing as that is where the age discrimination element was proven.

    It was the judges and firefighters unions that took that route which has led to this proposal.

    The 'reform' only has a benefit to the tax-payer, in the short-term as it cuts the pension costs but in the long-term makes teaching just that much less attractive a profession - so the tax-payer may not get the quality of applicants for the job that they would like. (Unlike the MPs whose pay review board seem to suggest, regularly, are underpaid)
    Prim likes this.
  9. hhhh

    hhhh Star commenter

    Some might they think that sending them into badly ventilated buildings, while a pandemic rages, with less than 10 cm between pupils at certain times of the day, and no PPE, might negate the need for pensions (or at least result in those who feel so weak after recovering from the virus that they no longer want to work FT) anyway?
  10. Arkle20

    Arkle20 New commenter

    Thanks for your ongoing excellent insights, Dave.
    I have a question regarding the changes. I currently pay ERRBO into the CARE scheme at about £60 a month. I have paid a few thousand pounds in ERRBO since 2015. I am 55. Due to the changes, this is now not beneficial at all as most of my CARE scheme I will ask to be transferred to Final Salary. I may then take the couple of years of CARE, instead of 10 years, at 60 and actuarilly reduced.

    In Annex A, A18, page 39, the report states that any ERRBO refund will be taxable in the usual way.
    Two questions:
    1. Will any refund of ERRBO be taxed at 40%, (I just squeeze into the upper tax rate) when they refund it.
    2. I am minded to get in touch with my council immediately to stop any further ERRBO payments if it is going to be returned taxed at 40%. Is that a sensible thing to do or have I got the tax payment wrong?
  11. diddydave

    diddydave Lead commenter

    I'm afraid I have no precise knowledge on how they intend to treat it.
    For instance it is not clear if the refund will be taxed at the time it is made, i.e. as one big lump sum in 2022, or as the contributions would have been at the time they were paid, i.e. spread out over the previous tax years.

    I will, and would suggest you may want to, respond to Question 12 and make the following points:
    a) The tax position of members who had taken definitive action between 2015 and 2022 to enhance their retirement benefits through the purchase of ERRBO can only be adversely affected if refunds are made without the option to convert payments made to that scheme to another scheme that offers the same tax relief.
    b) A refund that is taxed at the point in time that it is made is likely to create an additional tax liability for many members who may then be taxed at a higher rate than they would have been at the time.
    b)(i) To remedy this the tax liability for refunds should be limited to the rate at which those contributions would have been taxed at the time they were paid, and/or
    b(ii) To remedy this tax liability it would be possible for the scheme to base a valuation on the contributions made at the time as though they had been invested in a money-purchase pension scheme and allow members to transfer this amount to another registered provider thereby removing changes to the tax position.
    b) In A.18 where it says "it would not be possible to convert it into an equivalent value of AP in the
    legacy scheme ", that is not absolutely true. The costs of buying AP in the legacy scheme at the time when the ERRBO payments were made are known so it would be possible to convert them to an AP value for the legacy scheme based on the contribution made rather than seeking to convert it to an equivalent value.
    c) Any member who has made ERRBO payments would be able to refer their cases for consideration under A.43-A.47 (Contingent decisions). Failure to provide an adequate transfer of ERRBO contributions to either AP or a transfer value to another registered scheme will lead to many claims under the terms of "Contingent Decision" and be costly to administer. ERRBO payments could not be a clearer case of a contingent decision being made.
    neilboyd likes this.
  12. Arkle20

    Arkle20 New commenter

    Thanks for the incredibly detailed reply. That all makes sense. I hope they simply transfer the ERRBO money into my final salary.
  13. diddydave

    diddydave Lead commenter

    That is MY suggestion but from the document the default position unless we can get it changed is that you will be given it back and they'll take a chunk in tax.
    neilboyd likes this.
  14. coolhands

    coolhands New commenter

    Sorry can’t click on link at moment as on phone but does it allow those of us moved onto care to move back to final salary and therefore still go at 60 if that was your NPA as you joined before 2007? That is the benefit I want back most ie to be able to go at 60 as per my earlier pension not 67 as per my later CARE pension!
  15. coolhands

    coolhands New commenter

    Wouldn’t it be better to not have that discussion on this thread? IMO this should be kept factual about the remedy.
  16. diddydave

    diddydave Lead commenter

    Yes, the basic change is very straight-forward.
    It applies to the period between 2015 and 2022 for those who started their pensions before 2012 - so definitely you with your pre-2007 start.

    You will be able to opt to have that period treated as being in the Final Salary scheme with the NPA of 60.

    (If you joined after 1/1/2007 then your Final Salary scheme is with an NPA of 65)
  17. coolhands

    coolhands New commenter

    Amazing, thanks. For me that is the best benefit. I know will vary for others

    have you any idea what will happen to those that opted in to various flexibilies? Me and my wife both purchases ‘buy out’ and also faster accrual of differing amounts over time. If we opt back to final salary how will the value of those be given back?
  18. diddydave

    diddydave Lead commenter

    ... even those who have already retired will be asked to choose at some point and it will be backdated.
  19. HannahD16

    HannahD16 New commenter

    Hello everyone
    At last some news on the case!
    I have questions too (DD!)
    I have opted for faster accrual for one year up to 31st March 2021 and also for blocks of AP to be paid over several years. I accept that these will be paid into my post 2022 CARE pension with perhaps exception of this year and next?

    As a late starter, I’m wondering if it would be worth finishing up my FAcc next year and instead spend the year 2021-2022 buying AP over one year only? I would be prepared to make next year one of bunging all I can afford into AP if I can take the extra at 60 as well rather than waiting longer to 67.

    My question is will that one year of buying extra AP up to 2022 be included in my Final Salary pension which like Coolhands I am looking forward to taking at 60?
    I will continue to work up to age 60 so am happy enough that the remaining few years after 2022 will go to CA pension which I aim not to take until the CARE NPA of 67. Thank just want to make life comfortable for those 7 years in between.

    I am happy that it will be more affordable to go at 60 now than it would otherwise have been without restoration of those 7 years from 2015 to 2022 into Final Salary and NPA 60.
    Great news
    Any thoughts or insights welcome.
  20. coolhands

    coolhands New commenter

    I have an alternative question suppose for various other reasons I can’t afford to stop working until say 65. In that scenario Is it better to stay in CARE rather than opt back to final salary?

    in other words which is worth more money if you don’t want to claim pension at the earliest age as possible.

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