Annual Allowance

  • Answer:

    Transitional protection allowed members, who were within ten years of their normal retirement age, to remain in their final salary schemes, while other members moved to the new career average schemes in, or after, 2015.

  • Answer:

    Several judges and firefighters made claims (McCloud and Sargeant cases) in the Employment Tribunal on grounds that the transitional protection offered to older members when schemes were reformed in 2015, which meant they remained in their old pension schemes (Final Salary), was discriminatory. They argued that younger members were treated less favourably than older members who were given transitional protection.

    The Court of Appeal ruled, in December 2018, that transitional protection in the judges’ and firefighters’ pension schemes gave rise to unlawful discrimination.

    In July 2019, the government confirmed that they accepted that the Court of Appeal’s judgment has implications for all the main public service pensions schemes, including teachers, as these schemes also provide transitional protection arrangements for older members.

    In March the government confirmed, in a written ministerial statement which can be found here(This link opens in a new window), that it would address the difference in treatment since 2015 for all affected members regardless of whether they had submitted a legal claim and ensure equal treatment going forwards.

  • Answer:

    The consultation closed on 11 October 2020 and the government has now published its response after considering all the submissions

    Members who are already affected by this, i.e. retired, part retired, or suffering ill-health, will have their case prioritised. We’ll be in contact with them as soon as soon as is practicable.

  • Answer:

    We’re working with the Department for Education to review the government response and develop the IT systems and administration processes required to provide affected members with the options for their service in the remedy period. Please be assured, information will continue to be shared so you’re kept up to date.

  • Answer:

    The government was consulting on two options to remove the discrimination caused by transitional protection arrangements. Both options provide members in scope with a choice of receiving either their old or new scheme benefits. Full details are set out in the consultation document (This link opens in a new window).

  • Answer:

    No. The transitional protection was a policy that kept those closest to retirement age in the legacy final salary teachers’ schemes, when others were moved automatically to the reformed career average scheme, and it is this policy that the court found to be discriminatory. The proposed remedy will ensure that all affected members have access to the scheme that they consider is better for them for the period involved.

  • Answer:

    • If a member is eligible, they’ll choose between their final salary (legacy) and career average (reformed) pension scheme benefits for service between 1 April 2015 and 31 March 2022 (the remedy period). they’ll make their choice at the time they take their pension benefits (e.g. when you retire), this is named the Deferred Choice Underpin (DCU)
    • Initially, members who were moved to the career average (reformed) scheme in 2015 (or later if they had tapered protection), will be moved back into the final salary (legacy) scheme for the remedy period. However, when they then take their pension benefits, for example at retirement, they’ll get to choose between their final salary (legacy) and career average (reformed) scheme benefits. At this point, they’ll receive the necessary information to be able to make a choice about which pension scheme benefits are better for them
    • Affected members who have already taken benefits from the final salary (legacy) scheme, or will before April 2022, will be given a choice between their final salary (legacy) and career average (reformed) scheme benefits for service between 2015 and the date they take their pension benefits. This choice will be offered as soon as possible after legislation is implemented and any change to benefits will be backdated
    • From 1 April 2022 all active members will accrue service in the reformed career average scheme.

  • Answer:

    It’s important to remember that the period of service affected is that between 1 April 2015 and 31 March 2022. This is known as the remedy period.

    As, for many members, the career average scheme is more beneficial, they’ll be given the opportunity to make a choice at retirement as to whether they wish to take final salary (legacy) scheme benefits or career average (reformed) benefits in respect of their service during the remedy period. It cannot be a combination of the two. This is referred to as the Deferred Choice Underpin (DCU). We’ll provide sufficient information to enable them to make an informed choice based on what best suits them.

  • Answer:

    You can find further information on the response on the government website (This link opens in a new window) or in our factsheet.

  • Answer:

    Depending on members’ personal circumstances, many members may be better off in the career average (reformed) scheme so it’s not fair to simply move everyone back into the final salary (legacy) schemes. The government therefore wants to provide members with the option to choose between these scheme benefits for the period between 1 April 2015 and 31 March 2022.

  • Answer:

    The government has also confirmed that from 1 April 2022, all those who continue in service will only be eligible to do so as members of their respective reformed pension schemes, i.e. those introduced in 2015, and of which many are already members in relation to service from that date. Therefore, all active members will be placed in the career average (reformed) scheme from 1 April 2022. The final salary link for members with prior service in the final salary (legacy) scheme would be retained.

  • Answer:

    The government’s response to the consultation informs that members affected by the discrimination will be given the opportunity to decide which scheme they have built up service in during the remedy period. This may or may not, change the value of their pension benefits.

  • Answer:

    The government acknowledges that many members may wish to retain their current arrangements until the point at which they retire, even if this is after 1 April 2022. However, the government does not believe it would be fair to allow some members, and not others, to continue under different arrangements and as members of different schemes, after the discrimination has been addressed and the remedy period ends.

  • Answer:

    The government believes that the proposal that anyone who remains in service from 1 April 2022 will do so as a member of their respective reformed career average scheme is right and ensures equal treatment in terms of scheme membership. Some individuals may be better off in the career average scheme, therefore putting everyone back into the old schemes would mean that some members may be made worse off. Providing the choice means that individuals can receive scheme benefits that are best for them.

  • Answer:

    Members are best placed to make this choice as it will depend on their personal circumstances and preferences. We’ll provide them with information that reflects both their final salary and career average scheme benefits. This will provide them with visibility of their expected benefit entitlements for the remedy period in advance of their decision, normally at the point a pension is paid.

  • Answer:

    The government is clear that the DCU will provide greater certainty for members and is also the right approach for schemes and the government. DCU avoids the need for those affected to make assumptions around things such as their career, and retirement age, which would increase the risk of making an incorrect decision, particularly if they’re a younger member.

  • Answer:

    Yes, as all active members will be placed in the career average (reformed) scheme from 1 April 2022. The final salary link for members with prior service in the final salary scheme will be retained.

  • Answer:

    No, they’ll be able to choose to receive their benefits from either the final salary (legacy) scheme or from the career average (reformed) scheme, for any period of service between 1 April 2015 and 31 March 2022.

  • Answer:

    No, they don’t have to remain in pensionable service through to 2022 to receive the benefits of the remedy. The remedy will be applied to all service between 1 April 2015 and 31 March 2022, irrespective of when their pensionable service ends.

  • Answer:

    No. Normal Pension Age (NPA) in most of the reformed schemes is linked to the State Pension age, reflecting that most people can expect to live longer and have longer working lives. Nobody, though, is required to work longer if they don’t wish to do so. If a member has reached their Minimum Pension Age they can take their pension before NPA with the pension being adjusted fairly to reflect the fact they’re likely to be paid for longer. They can also choose to work beyond their NPA and receive a bigger pension. There are options available for them to increase their pension benefits prior to retirement.

  • Answer:

    The DCU will offer a choice of having the benefits accrued in the remedy period paid on either a career average or final salary scheme basis during the remedy period. The final salary element will be based on the section of the final salary scheme that a member accrued benefits in (protected / tapered protection members) or would have if they hadn’t been moved to the career average scheme (transition / tapered protection members).

  • Answer:

    No, all active members will be placed in the career average (reformed) scheme from 1 April 2022.

  • Answer:

    For those members who built up service in the career average (reformed) scheme during the remedy period, this service will instead be placed in the final salary (legacy) scheme at the end of the remedy period. This must happen to address the discrimination and so all affected members can be treated equally, in line with those older members who remained in the final salary scheme.

  • Answer:

    It's important to realise that not all members are affected by the changes. The changes only affect members who were both in service on or before 31 March 2012 and have continuous service on or after 1 April 2015, including if they have a qualifying break in service of no more than five years.

  • Answer:

    A member will not be affected by the changes if they:

    • first joined one of the main public service pension schemes on or after 1 April 2012
    • have had a break in service of more than five years
    • have no service in the remedy period (1 April 2015 – 31 March 2022)
    • retired and took their final salary pension in full prior to 1 April 2015.

  • Answer:

    If they retired before the Deferred Choice Underpin (DCU) is implemented and have a period of relevant service between 1 April 2015 and 31 March 2022, they’ll be offered a choice once the legislative changes have been made to implement the DCU. The choice will be retrospective and backdated to the point that payment of their pension benefits began.

    The legislation that allows schemes to do this is limited in effect. It allows schemes to return eligible members and retired from the career average (reformed) scheme to the final salary (legacy scheme) in relation to service after 1 April 2015. It does not however allow for all consequential matters to be dealt with satisfactorily in all cases, for example, in cases where there are interactions with the tax system.

    In all cases if they receive a revised pension award, this will be backdated to the date their pension award relating to the remedy period was originally made.

  • Answer:

    This will depend on when the member started with the Teachers’ Pension Scheme. The changes only affect those who were both in service on or before 31 March 2012 and have continuous service on or after 1 April 2015, including if they have a qualifying break in service of no more than five years.

  • Answer:

    Where an eligible member has died since 1 April 2015, we’ll review these cases as soon as practicable. Where the member retired from the career average (reformed) scheme, we’ll seek to revisit these cases ahead of the introduction of the DCU where possible. We’ll check whether a higher pension or lump sum amount would be due under the alternative scheme.

  • Answer:

    From 1 April 2022, all active members of the Teachers’ Pension Scheme who continue in service will be moved into the career average (reformed) scheme.

  • Answer:

    The proposals set out within the consultation apply to all members who were in service on or before 31 March 2012 and on or after 1 April 2015, including those with a qualifying break in service of less than five years, across all affected public service schemes. This includes those members who are currently active, deferred or retired.

    Members who first joined their scheme after 31 March 2012 were ineligible for transitional protection regardless of their age, and so are not affected by the discrimination identified by the court.

  • Answer:

    No, the discrimination identified by the courts applies to members who were active on the 31 March 2012 and on the 1 April 2015 and therefore they’ll be affected by the changes in the government proposals. This includes if they are either an active, deferred or retired member.

  • Answer:

    Members who were subject to the discrimination will be within scope of any changes made to schemes, whether they are deferred, retired or active members.

  • Answer:

    The consultation reference to the ‘remedy period’ is the period for which members would be offered the choice as to which scheme their service should be considered under. The consultation states the remedy period will be from 1 April 2015 to 31 March 2022.

  • Answer:

    You don’t need to do anything now except signpost members to the information we’ve suggested and advise them that they should wait to be contacted directly from us.

    We do anticipate there will be some queries on an individual basis but will understand more on this as we work though the consultation response with the Department for Education. It’s therefore important to ensure that member records are kept up to date and you retain service and salary information in case we do have queries in the future.

  • Answer:

    No. The government confirmed that whichever solution is implemented, it will apply across all public sector schemes and for all members with relevant service, regardless of whether they’ve lodged a claim.

  • Answer:

    Yes. Depending on the eventual policy, members may need the relevant paperwork to help them reassess previous tax liabilities. Therefore, it would be helpful if people kept their paperwork related to tax from April 2015 onwards.

    This would include all self-assessment returns, P60s, the annual statements from your pension scheme administrator and documents relating to any other personal or occupational pension schemes.

  • Answer:

    It will take some time before any changes to individuals’ pensions are implemented because we need to make amendments to our systems and processes to make it happen, and regulatory changes need to be put in place. Please be assured, information will continue to be shared so members are kept up to date.

  • Answer:

    For members who are in the career average scheme when they come to take their pension, we’ll introduce the DCU and provide them with information to make their choice as soon as practicable. We’re working now on introducing the system and administrative processes that will allow us to provide them with their remedy period choices when they submit their retirement application.

  • Answer:

    It’s important to remember that the period of service affected is that between 1 April 2015 and 31 March 2022. This is known as the remedy period.

    As, for many members, the career average scheme is more beneficial, they’ll be given the opportunity to make a choice at retirement as to whether they wish to take final salary (legacy), or career average (reformed) scheme benefits in respect of their service during the remedy period. It cannot be a combination of the two. This is referred to as the Deferred Choice Underpin (DCU). We’ll provide information to enable them to make an informed choice based on what best suits them.

  • Answer:

    We’re working to identify the necessary system and process changes. There are also outstanding technical details – for example on flexibilities – and primary and secondary legislation to be put in place. At this point we cannot provide a date from when the changes will be implemented. We will, of course, keep you and members updated on progress.

  • Answer:

    The government’s response on the question of what to do with flexibilities was:

    After reviewing responses, and through further engagement with schemes, the government is considering ways to ensure that members may retain rights in the schemes in which they made voluntary member contributions. For the Teachers’ Pension Scheme this includes additional pension, faster accrual and the buy-out of the standard rate of reduction ("AAB Buy-out").

    Government legislation (The Public Service Pensions and Judicial Offices Bill) provides powers through scheme regulations to offer at least one of the following options:

    1. An equivalent value in the other scheme

    2. Rights that the same contributions would have bought in the other scheme

    3. A refund of contributions

    The technical detail of how this will be implemented for the Teachers’ Pension Scheme will be decided through scheme level discussions, and subsequent consultations on secondary legislation (scheme regulations).

    As and when we have further details, we’ll let you and members know.

  • Answer:

    The government is considering ways to ensure that those with flexibilities are able to retain the benefits of the voluntary contributions they have made.

    The technical detail of how this will be implemented in each scheme will be decided through scheme level discussions, and subsequent consultations on secondary legislation (scheme regulations).

    As and when we have further details, we’ll let both you and members know.

  • Answer:

    The government is considering ways to ensure that those with flexibilities retain the rights in the schemes in which they have made voluntary contributions.

    The technical detail of how this will be implemented in each scheme will be decided through scheme level discussions, and subsequent consultations on secondary legislation (scheme regulations).

    As and when we have further details, we’ll let both you and members know.

  • Answer:

    The government is considering ways to ensure that members with flexibilities retain the rights in the schemes in which they have made voluntary contributions.

    The technical detail of how this will be implemented in each scheme will be decided through scheme level discussions, and subsequent consultations on secondary legislation (scheme regulations).

    As and when we have further details, we’ll let both you and members know.

  • Answer:

    Yes, although the interaction with permitted maximum extra pension and previous elections members may have taken in the remedy period is still to be determined. As and when we have further details, we’ll let you and members know.

  • Answer:

    Yes. They can still retire when they choose to do so. If they are affected by the changes they’ll be provided with their choices either retrospectively or when they choose to retire, depending on when they retire and when we are able to implement the DCU.

  • Answer:

    Yes, they’ll be given the opportunity to make a choice at retirement as to whether they wish to take final salary (legacy), or career average (reformed) scheme benefits in respect of their service during the remedy period. It cannot be a combination of the two. This is referred to as the Deferred Choice Underpin (DCU). We’ll provide information to enable them to make an informed choice based on what best suits them.

  • Answer:

    Yes, they’ll be provided with information to enable them to make an informed choice at retirement that suits them. This will help them choose whether they wish to take final salary (legacy), or career average (reformed) scheme benefits in respect of their service during the remedy period. It cannot be a combination of the two. This is referred to as the Deferred Choice Underpin (DCU).

  • Answer:

    The government’s consultation response set out the treatment of Annual Allowance:

    Under the DCU, reformed scheme members will be legally restored to membership of their legacy schemes by 2023 in respect of the remedy period. This will retrospectively alter the pension benefits they have accrued in each of the tax years during the remedy period. For the minority of members with sufficiently high income and/or pension accrual to trigger an AA charge, this could change their liability for that AA charge in a tax year or tax years falling within the remedy period. Most of these individuals will see a reduction in AA charge owed.

    Where an individual paid their original AA charge up front, they will receive a refund. If the individual originally used Scheme Pays to meet the tax charge, then the associated pension debit will be amended as appropriate, and schemes will receive the refund. In those cases where additional AA charge is owed, the individual will have the opportunity to utilise Scheme Pays if they do not want to pay the tax charge upfront. If a member then faces an increased AA charge as a result of choosing reformed scheme benefits when they take their benefits, the government will ensure they do not bear the cost of any additional AA charge that is directly caused by the member exercising that choice.

    We await further details on the above points and how changes will be processed.

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