What does the valuation of the latest Northern Ireland Teachers’ Pension Scheme mean for members’ contributions?
Member contributions
The latest Northern Ireland Teachers’ Pension Scheme (NITPS) valuation carried out by the Government Actuary’s Department identified a shortfall in the member contribution structure in meeting the contribution yield over the next valuation implementation period, 1 April 2024 to 31 March 2027.
This was due to member contribution tier thresholds increasing at a higher rate, based on the Consumer Prices Index (CPI) inflation rather than average salary growth, which was lower than inflation. This had an onward effect on distribution of the membership in the contribution tiers.
The yield from the member contribution structure was estimated to be, on average, 0.26% lower than the target yield of 9.6%.
The shortfall will now be met by an increase of x1.031 for tiers 2-6 and this is the rationale for the slight increase in member contributions from April.
The contribution rate for the lowest tier, which currently covers those earning up to £34,872.99, will not be increased.
In line with NASUWT’s policy position of protecting the lowest earning members and fairness for all members, teachers’ pension contributions are tiered and based on the amount of salary they earn rather than the full-time equivalent (FTE).
Teachers earning less than £34,873 will therefore not be impacted, with their pension contribution remaining at 7.4%.
In the higher paid tiers, teachers earning £50,000 will pay approximately an extra £10 a month or £120 a year and teachers earning £80,000 will pay approximately £168 extra per annum or an extra £14 per month.
The adopted structure ensures the Scheme’s ongoing viability and sustainability by minimising potential opt-outs from the NITPS, whilst ensuring its ongoing sustainability and affordability to employers and members at all stages of the profession as part of the overall reward package for teachers.
| Actual annual pensionable earnings* (From 1 April 2024) | Current member contribution rate | Actual annual pensionable earnings* (From 1 April 2025) | Member contribution rate (From 1 April 2025) |
|---|---|---|---|
| Up to £34,289.99 | 7.4% | Up to £34,872.99 | 7.40% |
| £34,290 to £46,158.99 | 8.6% | £34,873 to £46,943.99 | 8.87% |
| £46,159 to £54,729.99 | 9.6% | £46,944 to £55,660.99 | 9.90% |
| £54,730 to £72,534.99 | 10.2% | £55,661 to £73,768.99 | 10.52% |
| £72,535 to £98,908.99 | 11.3% | £73,769 to £100,590.99 | 11.65% |
| £98,909 and above | 11.7% | £100,591 and above | 12.06% |
| Example salary | Net effect (Annual) | Net effect (Monthly) |
|---|---|---|
| £30,000 | -£0.00 | -£0.00 |
| £40,000 | -£85.00 | -£7.00 |
| £50,000 | -£119.00 | -£10.00 |
| £60,000 | -£114.00 | -£9.50 |
| £80,000 | -£168.00 | -£14.00 |
Indexation
All bands will increase by 1.7% due to the pensions increase from April 2025, in line with the increase in the CPI in the 12 months from the previous September (September 2024 where CPI was 1.7%).
Therefore, teachers in service (teaching) will receive a pension increase to their accrued CARE pension comprising CPI inflation: (1.7%) + (1.6%) in service credit) = 3.3% from April 2025 under the career-average NITPS.
Independent financial advice
NASUWT is not regulated by the Financial Conduct Authority (FCA) and therefore the Union cannot provide independent financial advice on pension choices, other than to point out factually the advantages of the TPS design and benefit structure, their general value to members and the alternative options available.
The NITPS
NASUWT endorses and expects all teachers working in the public sector to be eligible to join and participate in the NITPS.
The NITPS is the default pension scheme of choice for teachers, in that the Government directly funds the employer contributions through HM Treasury, with the scheme being fully paid up, meaning that the scheme is unfunded and therefore constitutes an important part of the overall remuneration and reward package for teachers.
The NITPS is a great selling point for younger teachers entering the profession, with some of their deferred pay being invested for them as pension in their retirement.
The NITPS is a tax-efficient way of saving up for retirement and provides a guaranteed level of defined benefit pension, plus a lump sum if you choose, at retirement, with all the investment risk borne by the government, making it one of the safest choices of pension for teachers.
Contributions are deducted before marginal rate tax and therefore they are tax-free with each £1 of contribution costing £0.80p at the basic tax rate (20%).
The NITPS also provides for certain death benefits and protection for survivors. Many other inferior pension schemes do not.
Furthermore, teachers’ pensions are inflation proofed, meaning that they grow at the rate of CPI inflation (+1.6% for teachers whilst they remain in service). Therefore, pensions won’t lose value over time and will not be eroded by high levels of inflation. This is pertinent, given the unprecedented levels of inflation that we have encountered recently.
Employers contribute 29.1% towards your pension and, should you opt out of the scheme, there is no other way to reclaim this contribution element that is essentially your deferred pay. Conversely, the average teacher’s contribution remains at 9.6% towards their pension by way of employee contributions.
NASUWT recognises the financial challenges presented to our members due to the current cost-of-living and energy crises.
Where members have previously opted out, they may remain eligible to opt back in and they may wish to check this with their employer so that they can continue to accrue and access the benefits of the NITPS at retirement and remain eligible to access that element of their deferred pay at retirement.
Equality impact assessment
Section 75 of the Northern Ireland Act 1998 requires the Department of Education to have due regard to the need to promote equality of opportunity. The Department’s Equality Screening determined that these proposed changes will not significantly impact on any of the Section 75 groups.
Scheme members in the lowest tiers are likely to be women, Black and minority ethnic or young (younger teachers tend to be lower paid and have a higher pension age).
Furthermore, women are more likely to work part time, earn less and accrue lower pension entitlements, so will be better protected in the lowest tiers, with contributions rising the least. The proposed changes therefore accord with the Act and do not adversely impact any groups.
Pay
An increase in contributions comes as another blow for teachers in Northern Ireland. NASUWT understands the frustration of members facing higher contributions, given that a retrospective pay award of 5.5% (backdated to 1 September 2024) has only just been made.
NASUWT, however, continues to campaign for real-terms pay parity in Northern Ireland as pay and pensions continue to fall behind those in the rest of the UK.