By Jacques Szemalikowski, Pay and Conditions Specialist: Pensions
In April 2015, as a part of wider public sector pension reforms, the Teachers’ Pension Scheme was changed from a Final Salary Scheme to a Career Average Revaluation (CARE) Scheme. In the switch, ‘protection’ was provided to those within ten years of retirement as of April 2012. Those teachers afforded protection remained in their legacy Final Salary Scheme, with a lower retirement age. To avoid a cliff-edge, teachers who just missed out on the protection were tapered-in, on a sliding scale.
Seemed sensible. The problem is that it was illegal! Action brought in relation to the firefighters and judges’ pension schemes, the McCloud/Sargeant case, judged the approach to be age-discriminatory to younger members. They were simply switched straight over with no protection or tapering.
Having accepted the subsequent Court of Appeal’s ruling, the government set about seeking a fix (or remedy). The consultation on the remedy has now closed.
The remedy period being addressed is 1 April 2015 to 31 March 2022. The changes will apply to all members of the Teachers’ Pension Scheme who were in post on the 31 March 2012 and still in post on 1 April 2015, whether they are still in the scheme or not, or indeed have retired.
What do we know?
What we know is that all members in scope will be offered a one-time binary choice of whether they wish to be in the CARE scheme, or their legacy scheme for the above period. As of April 2022, everyone will be in the CARE scheme regardless.
The outcome of the consultation will determine whether teachers make an immediate choice at the end of the remedy period (April 2022), or whether the choice is deferred until the point of retirement.
An immediate choice would address the issue promptly and give certainty to scheme members. However, this may be some years prior to retirement, making it hard to make the most beneficial financial decision. Seeing as this will apply to the entire public sector, there are probably not enough financial advisors in the country to cope
with the ‘big bang’ this would cause.
What you need to do
Consequently, the deferred choice is by far ASCL’s preferred approach
. Scheme members will be making their decision when their benefits are due for payment. There will be greater certainty in being able to compare the merits of both schemes for the years in scope. However, it is more complex as the time to decide may be ten or 20 years down the road. This means it is crucial that teachers keep all their payslips and P60s.
A major concern is that whilst it is the government that was found wanting by the courts, the cost of the remedy is intended to lie with the scheme. This may result in cost pressures being passed on to the members and schools.
Finally, some teachers will have seen adverts, or received emails, from organisations offering to fight their corner on this discrimination. This is a scam. The remedy proposes offering a free choice to all scheme members in scope, with no detriment. Press delete!
is ASCL's Pay and Conditions Specialist: Pensions