Every four years, the Government Actuary’s Department carries out a valuation of all unfunded public service pension schemes, including the Teachers’ Pension Scheme. Find our more about this with our FAQs below.
Answer:
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.
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.
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.
The valuation results show that the cost of providing pensions has increased. Therefore, the Government has 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 will take effect from 1 September 2019 to align with the academic year and allow employers additional time to plan for its implementation.
Member contribution rates have not changed as a result of the valuation. There will, however, be the usual annual review of the contribution salary bands to reflect changes to inflation. Adjustments to the bands are effective each year in April.
If your employer chooses to leave the Teachers’ Pension Scheme, they’ll be required to enrol you into another pension scheme. If the new scheme that your employer offers is a ‘Defined Benefits’ scheme then you may be able to transfer your teacher’s pension over to it, as long as you do this within 12 months of entering the new scheme.
If you choose to leave your benefits in the Teachers’ Pension Scheme they'll continue to be index-linked, in line with the annual Pensions Increase, and you’ll be able to apply for your pension benefits from the age of normal minimum pension age (currently 55).”
The cost control mechanism was introduced in 2015 with the public service pension scheme reforms.
It’s part of the valuation process to ensure the costs of public service pensions remain sustainable, protecting the taxpayer from increased costs; but also maintaining the value to members when costs fall.
The government will set out how the cost control part of the 2016 valuations will be completed. This will determine how the cost cap calculations are to be completed for the Teachers’ Pension Scheme. The part of the 2016 valuations that determined the employer contribution rate will not be re-visited.
The government announced in September 2018 that it would ask the government Actuary to review the cost control mechanism. This was in the context of the provisional results of the 2016 valuations, which indicated that the mechanism, as currently designed, is too volatile.
The government Actuary’s final report sets out that the mechanism is not currently meeting its objectives and could be improved in a number of ways.
The proposed changes are not designed to cut member benefits. It’s expected that the reforms will make benefit changes (both cuts and increases to member benefits) less frequent. This is in line with the government's intention to establish a fairer balance of risks between the taxpayer and scheme members.
All the government’s proposals are in line with changes recommended by the Government Actuary. These recommendations were intended to be considered in various combinations and not advocate implementing all of the recommendations.
The government believes that its combination of proposals will establish a fairer balance of risks between the taxpayer and scheme members and create a more stable mechanism. The government sets out the reasoning behind its proposals in detail in its consultation, as well as its reasoning for not proposing on some options.
The aim is to implement the changes to the cost control mechanism ahead of the completion of the 2020 valuations process. The government will legislate for these changes once it has responded to the consultation and when parliamentary time allows.
The 2016 valuations will not be affected by these proposed changes as the government aims to implement its proposed changes ahead of completion of the 2020 valuations process.
The Government is currently setting out the detail of how the cost control element of the 2016 valuations will be completed.
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