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Scheme Reform Pensions Calculator - NASUWT warning notice

A ‘Scheme Reform Pensions Calculator’ (new window) has been added to the Teachers’ Pension website to provide teachers with an estimate of the effects of the Coalition Government’s final reform of the Teachers Pension Scheme (TPS) due to take effect from April 2015. 

Scheme members are required to input their personal details, having first read the extensive qualifying notes, to get an illustration (at current values) of the pension benefits they will receive under the reformed provisions.  The TP calculator then calculates the sum of their pre -2015 and post-2015 pension (including any lump sum) and the new normal pension age. Users can adjust the retirement age to give an indication of the benefits they would receive if they choose to retire earlier or later.

However, before using the calculator members should note its limitations including:

  • Teachers’ Pensions has issued a caveat with the estimator, acknowledging from the outset, that “the calculator does not provide a formal statement of your pension entitlements, the results shown ...are for illustrative purposes only.”
  • It assumes that an individual teacher will continue in the same working pattern from now until their retirement and will not leave service – a big assumption for younger members with many years to go until retirement
  • It also assumes that if the teacher is not currently working part-time they will not work part-time in the future or take unpaid leave or a break in service that will affect their pension
  • It ignores the possibility that teachers could receive additional payments in the form of a TLR payment for a number of years and then relinquish that responsibility prior to retirement. The TLR would count towards the calculation of the career average salary but would not be picked up by the calculator
  • It relies upon the teacher providing an estimate of the salary (in today’s monetary terms) ‘that you would like to be earning at the end of your teaching career' - hardly a sound basis for planning for your retirement
  • The calculator assumes a teacher will progress towards their estimated final salary steadily and evenly, by taking the average of the teacher's current salary and estimated final salary. In reality, of course, it is not possible to know in advance exactly how a teacher's career and pattern of remuneration will progress up until retirement
  • The calculator shows the projected normal pension age (i.e. the age at which a teacher can draw their TP benefits in full, without an actuarial reduction for early payment). The normal pension age (npa) within the new TPS will be linked to any future changes in the State Pension Age (SPA) and depends on the teacher's date of birth but takes no account of further possible increases in the pension age beyond those already announced. In this respect, the Chancellor announced in the 2012 Budget that there will be regular five-year reviews of the State Pension Age to ensure it keeps pace with improvements in life expectancy and has since announced further increases in the State Pension Age to 67 by 2028 and to 68 by 2036 with a further increase to 69 by the late 2040s.

Because of the above and other limitations, the calculator is unlikely to be accurate in predicting the future benefits for individuals - even if teachers can correctly estimate their final salary at retirement - and could be seriously misleading.

Nevertheless the calculator does reveal the potential impact (at today’s values) of the reformed career average pension compared to the current final salary scheme provisions as shown in the examples, below, based on ‘full’ service using the TP calculators.

Comparison of existing and future benefits

 

Current salary point

M2

M6

UPS3

UPS3 +TLR

Primary Head (L23)

Age

23

28

40

40

45

 

 

 

 

 

 

Current npa

65

60

60

60

60

 

 

 

 

 

 

Salary point at npa

UPS3

UPS3 + £3k TLR

UPS3

UPS3 + £6k TLR

L28

 

 

 

 

 

 

Final salary

£36,756

£39,756

£36,756

£42,756

£72,752

 

 

 

 

 

 

Current pension (and lump sum) at 60/65

£26,342

£18884 +

(£56,652)

£17,459 +

(£52,377)

£20,309 +

(£60,927)

£34,557 +

(£103,672)

 

 

 

 

 

 

Reformed pension (and lump sum) at  60/65

£19500

£16,100 +

(£12,800)

£17,100 +

(£28,400)

£19,800 +

(£33,000)

£33,500 +

(£69,800)

 

 

 

 

 

 

New npa

68

68

67

67

67

 

 

 

 

 

 

Extra years  worked

3

8

7

7

7

 

 

 

 

 

 

Pension (and lump sum) at new npa

£22600

 

£25,100 +

(£12,800)

£23,900 +

(£28,400)

£27,700 +

(£33,000)

£44,900 +

(£69.800)

Those teachers who are within 10 years of their current normal pension age (60 or 65) as at 1 April 2012 will not be affected by the scheme changes and those within 13.5 years of their current Normal Pension Age on 1st April 2012 will benefit from partial protection from the reformed scheme provisions.

But all teachers, regardless of age or transitional protection, will have to pay up to 50% more for their pensions from 2014 following increases in members’ contributions in April 2012 and 2013, with further increases in April 2014. 

 

 

 

 

 

 

 

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