As you are aware there have been big changes to pension arrangements. You fall into the category of members who are directly affected by the changes. You may also be partially affected if you were aged between 47 and 50 on the 1 April 2012. The Association is attempting to establish what your views are. We are doing this at this time because there have recently been negotiations with Scottish Government in an attempt to procure a better settlement in Scotland. These negotiations have now come to a close. We have failed to gain our preferred position which was to break the link of teachers’ pensions to state retirement age (probably 68). However, there have been concession and we feel it is important to establish your views in order to decide whether the concessions are enough to allow us to move on from this issue. We therefore provide a summary of the position below and include some worked examples of pension arrangements that could apply to you.
Career averaging, which means that the pension you obtain on retirement is based on an average of your career earnings. This is regarded by many as a deterioration because your “final salary” would in most cases give you a higher pension. However, career averaging does have some advantages because CPI + 1.6% would be applied to each year of salary.
Accrual rates have been improved. Accrual rate means the rate at which you “accrue” or earn pension. As a result of negotiations, this rate has been improved from 1/60 to 1/57. In effect this improves your pension by 5%.
Actuarial reduction in the last three years of service before retirement (that is at age 66, 67 and 68). This was to be 5% for each of the years (reducing your pension by 5%) in fact it has now been agreed to reduce it to 3%.
So, Where Are We?
It is never reassuring to be told things could be worse. However, there have been significant improvement to the proposals that led us to participate in the “day of action” two years ago. The UK Government is resolute on the principle of linking the public service workers retirement age to the state pension age. It is possible, though for teachers to retire at 65 with a reduced pension which is an improvement on the proposals of 2 years ago. It is worth saying that simply continuing a campaign against the changes in the hope that the changes will be totally reversed by this or subsequent governments is unreasonable. The campaign delivered concessions. It is up to you to decide whether or not the concessions are enough. Please let us know.
Actuarial Adjustment: This is the way in which you can retire earlier. It means your pension is reduced to take account of early retiral
Accrual Rate: The rate at which you earn pension for each year of service.
Career Averaging (CARE): The new method of calculating your pension. At present your pension would be calculated on our FINAL SALARY. The new method aggregates your salary for each year of service and adds CPI (Consumer Price Index) + 1.6% to that for each year to protect against inflation.
Commutation: If you want to turn part of your pension (maximum 25%) into a lump sum then the process is known as commutation. The rate is 1 to 12 which means for each £1,000 of annual pension sacrificed you would get £12,000 lump sum.
CPI (Consumer Price Index): This is the preferred index used by the Government to measure inflation and is currently applied to state pensions as well as teacher pensions. At present it is 2.7% (September 2013 figures).