You would be forgiven for feeling confused about your teachers’ pension. The scheme has undergone lots of rapid changes over the past few years. Recent court rulings have made this even more muddled. For individuals within the scheme, depending on when you started your pensionable service, there will be a simple answer as to what arrangement you are in. However, a general guide can make this seem confusing. We offer some key points below, but if you are uncertain, you should approach an independent financial advisor who can provide a quick and straightforward answer.
The different arrangements
The scheme is divided into two arrangements. There is the final salary scheme and the career average scheme. However, the final salary scheme is then split again in two – with different terms for those who joined the scheme before 1st January 2007 and those who joined after this date but before the 1st April 2015.
Whatever your arrangement, your benefits are known as “Defined Benefits.” This means that your pension benefits are built on your salary and are calculated to these regulations and not in accordance with the investment performance of the scheme. This is a good thing and a bad thing. If the investment work of the pension is strong – you could have got more for your money. However, if the investment takes a hit – so will your pension benefit. Therefore, by being linked to your salary, you are guaranteed a set outcome that allows you to plan for your retirement with certainty.
The final salary scheme
You will be linked to the NPA60 or the NPA65 scheme, depending on when you started teaching. NPA stands for Normal Pension Age and relates to when you are expected to retire from teaching.
The career average scheme
From the 1st April 2015, all new members joined the career average scheme. Now instead of you receiving a proportion of your salary from the end of your career, your pension will be calculated as an average across the whole of your career.
For those who started teaching before 1st April 2015, you may be wholly in the final salary scheme, transitioning to the career average scheme, or have pension funds held in both schemes. You could be a protected member, a tapered member or a transitionary member. To know what arrangement you are in, you can a) look at your Benefit Statement that is issued each year or b) seek advice from an independent financial advisor.
The content in this article was correct on 15th November 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.