Valuation

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Following the scheme valuation, member and employer representatives came together to discuss changes to the member benefit structure to return pension benefits back to the level agreed in 2015. Those discussions led to a recommendation that, for the Teachers’ Pension Scheme, the rate at which pensions accrue should be improved.

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Every four years, the Government Actuary’s Department (GAD) carries out a valuation of all unfunded public service pension schemes. Teachers’ Pensions is one of these schemes.

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The valuation is the process by which scheme costs are measured and managed. It assesses the long-term cost of providing pensions and other benefits to members of each public service pension scheme and determines the appropriate employer contribution rates going forward.

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The valuation results showed that the cost of providing pensions had increased. Therefore, the Government decided that the employer contribution rate to the Teachers’ Pension Scheme should increase to 23.68% (including the administration levy of 0.08%). The changes to the employer contribution rate tool effect from 1 September 2019.

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In short, nothing. As soon as the outcome of the Employer Tribunal is known we’ll inform you of the result and provide as much information as possible.

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We’ll provide further information on likely timescales when we’re made aware of them.

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The valuation results show that the cost of providing pensions has increased. The Government decided to increase the employer contribution rate to the Teachers’ Pension Scheme to 23.68% (including the administration levy of 0.08%), with effect from 1 September 2019. This aligned the increase with the academic year and allowed employers additional time to plan for its implementation.

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The higher contribution rate was introduced from 1 September 2019. Although this could have been effective from 1 April 2019, the Government decided it was more appropriate to implement the revised employer contribution rate for the Teachers’ Pension Scheme on 1 September 2019, to align with the academic year and allow employers additional time to plan for its implementation. The Department for Education consulted on the additional funding that may be provided to some Teachers' Pensions Scheme employers to cover the additional costs.

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The Government has estimated that the cost of any likely adjustment to benefits will be at least similar to the cost of the proposed benefit improvements on which the revised employer rate is based.

If the revised employer contribution rate were not implemented from September 2019 as expected, a significant scheme deficit would occur. If that happened, there would need to be a further increase to the employer rate to address the deficit.

 

Answer:

Costs relating to member experiences have fallen as a result of reforms, however member costs are just one factor used to determine the cost of the Scheme.

The cost of providing pensions is determined by a number of factors, including key assumptions on the ‘discount rate’. Future payments are discounted using the ‘discount rate’ to provide a cost of providing benefits in today’s terms. If the discount rate is reduced it means that the cost today, to provide benefits in the future, increases.

HM Treasury reduced the discount rate for public service pensions to reflect the lower expected future growth in the economy.

Answer:

The cost of providing pensions is determined by a number of factors, including the assumptions adopted for the scheme valuation. The key assumption leading to the increase in costs is the ‘discount rate’. Future payments are discounted using the ‘discount rate’ to provide a cost of providing benefits in today’s terms.

HM Treasury changed the discount rate for public service pensions to reflect the lower expected future growth in the economy. A lower discount rate means a higher cost of providing benefits.

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The Department for Education recently concluded a consultation on the proposed funding arrangements. The consultation set out the Department’s proposal to fund those employers who are most reliant on government grants. Responses to the consultation are currently being analysed and a final decision on the funding position will follow.

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Independent schools participate in the Teachers’ Pension Scheme on a voluntary basis and can therefore leave the Scheme at any time. The school or it’s representative(s) must write to Teachers’ Pensions setting out the date from which participation in the Scheme will cease.

Once you leave the Scheme, all your employees will cease to be eligible to participate and their pension provision will become deferred. Further information on how to leave the Scheme can be found in our checklist.

A consultation – seeking views on proposed changes to the way independent schools withdraw from the Scheme – runs from 9 September to 3 November 2019. Further details are available on the Department for Education consultation hub:

https://consult.education.gov.uk/school-employment-division/teachers-pension-scheme-independent-schools-phased/ (This link opens in a new window)

Answer:

You can choose to leave the Teachers’ Pension Scheme but you’ll be required to consult with your staff on any changes and enrol your employees into another qualifying pension scheme. We recommend you take advice if you choose to follow this route.

If the new scheme that you offer is a ‘Defined Benefits’ scheme then your employees may be able to transfer their teacher’s pension over to it, as long as they do this within 12 months of entering the new scheme.