Teachers Scheme FAQs
What pension scheme will individuals be a member of from 1 April 2022?
From 1 April 2022, all those who continue in service will be eligible to do so as members of their respective reformed pension schemes (i.e. those introduced in 2015, of which many are already members), regardless of age. This includes members who were previously covered by ‘transitional protection’.
This means that any pension benefits after that point will be earned within the reformed pension schemes, but any benefits earned before within the legacy schemes up until that point will be protected.
How will people who retire before the introduction of the deferred choice underpin be treated?
Members who have retired before the DCU is implemented and have a period of relevant service between 1 April 2015 and 31 March 2022, will 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 pension benefits began.
In some cases, it may be possible for schemes to offer members a choice before the DCU is implemented.
However, the legislation that allows schemes to do this is limited in effect. It allows schemes to return eligible members who retired from the reformed schemes to the legacy schemes in relation to service after 1 April 2015 but does not allow for all consequential matters to be dealt with satisfactorily in all cases. So, for example, in cases where there are interactions with the tax system, perhaps where members have incurred or will incur tax chargers or where contributions differ between the schemes, it might not be possible to address all these issues before new legislation is made to implement the DCU.
Where possible, schemes will seek to offer reformed scheme members who retire before October 2023 a choice of legacy or reformed scheme benefits for the relevant period at retirement.
In due course it may be possible for schemes to revisit cases of reformed scheme members who have already retired ahead of the introduction of the DCU.
However, there are still some complex issues to be resolved before schemes are in a position to process cases - further details will be provided as soon as possible. In all cases where an individual receives a revised pension award, this will be backdated to the date their pension award relating to the remedy period was originally made.
Will members who had ‘tapered protection’ also be asked to choose between legacy and reformed scheme benefits?
Members who received tapered protection in 2015, or would have received such protection but for the provision that unlawfully excluded younger members from transitional protection, will be offered a choice of whether to receive legacy or reformed scheme benefits in relation to any continuous service between 1 April 2015 and 31 March 2022.
This will remove the discrimination that arose between older members who were subject to transitional protection and younger members who were not.
Will the survivors of eligible members who have died since 1 April 2015 also be asked to make a choice between the different pension schemes?
If an eligible member has died since 1 April 2015, we will review these cases as a priority. Where the member retired from the reformed scheme, schemes will seek to revisit cases ahead of the introduction of the DCU where this is possible. We will investigate whether a higher pension or lump sum amount would be due under the alternative scheme.
In the case of any increase, we will inform surviving beneficiaries and the higher amount will be paid with their agreement. If the higher amount is already in payment, the survivors will be notified.
The choice between benefits will fall to the late member’s surviving spouse or partner.
If there are children also in receipt of a survivor pension, and the decision maker lives in a separate household to the child, any decision taken will not affect the child’s pension. Where the child and decision maker live in the same household, the usual rules around total survivor benefits payable will apply.
What are the differences between the legacy and reformed schemes?
All public service pension schemes have different arrangements, however, the main changes between the legacy and reformed schemes for most schemes included a change to career-average pension schemes from final salary and an increase in normal pension age.
The change to career-average means member’s pensions are now calculated on their average salary throughout their career as opposed to their final salary.
The reformed schemes were designed to make public service pensions more affordable and sustainable for the future, while still ensuring public servants received appropriate pension provision at retirement.
The reforms created a fairer system. The move from (mostly) final salary to career average pension means members accrue their pension at a typically higher annual rate based on their average salary. Although some members are better off in legacy schemes, the reformed schemes are more beneficial for others, particularly many lower paid members.
Why is the government saying all members should be in the reformed pension schemes from 1 April 2022?
The reasons for the 2015 reforms still stand: the government is committed to ensuring generous public service pension provision, but this has to be affordable and sustainable in the long term. . The reforms aimed to achieve this, whilst also being fairer to lower and middle earners.
The 2015 schemes that were introduced following the recommendations of the Independent Public Service Pensions Commission (the reformed schemes) offer generous pension provision, improve affordability and sustainability, and are fairer to lower and middle earners.
The reformed schemes are some of the most generous available in the UK: backed by the taxpayer; index-linked; and offering guaranteed benefits on retirement; comparing very favourably to the typical private sector scheme.
The move from (mostly) final salary to career average pension means members accrue their pension at a typically higher annual rate based on their average salary. Although some members are better off in legacy schemes, the reformed schemes are more beneficial for others, particularly many lower paid members.
The transitional protection policy, which gave rise to discrimination, will have been removed and, from 1 April 2022, all those who remain in service will do as members of the reformed schemes, treating everyone equally in this respect, and ensuring the aims of the 2015 reforms are met.
Will these pension changes result in any tax changes for members?
The majority of members will see no change to their tax position over the remedy period.
For a minority of members, the pension changes will cause their tax position to change, which could result in tax charges for the member, or the member becoming entitled to a reimbursement of tax previously paid.
In some cases, the pension changes may mean that individuals will have to pay new or higher annual allowance charges, but typically only where their projected pension at retirement has increased. Adjustments to lifetime allowance charges may also be required, where retired members’ accrual changes.
Some members may also face changes in their contributions in respect of the remedy period, which may also affect their income tax position.
Where a member has already retired, a member’s total pension income may also change, and tax will be payable on any increase in pension.