Statement issued on reforming the Teacher Pension Scheme


The Department for Education has set out more detail to Parliament on reforming the Teacher Pension Scheme.

The agreement includes changes to the Government’s reference scheme to reflect the priorities of the teaching profession in relation to early retirement and other issues, consistent with the need to remain within the Government’s overall cost ceiling.
The agreement reached allows for further discussions on variations to the balance between the accrual rate and the CARE revaluation factor within the limits of the Government’s cost ceiling.

A DfE spokesperson said: "The Teachers' Pension Scheme will remain one of the best available but it will also be affordable for taxpayers. The deal guarantees all existing rights; gives a defined benefit, index-linked pension; and protects those closest to retirement now from any major changes.

"Reforms to public sector pensions are essential - the status quo has never been an option. The cost to the taxpayer of teacher pensions is already forecast to double from £5billion in 2006 to £10billion in 2016 and will carry on rising rapidly as life expectancy continues to improve. This deal will control those costs."

The core parameters of the new scheme include:

  • A pension scheme design based on career average;
  • A provisional accrual rate of 1/57th of pensionable earnings each year, and the resolution of outstanding issues not covered by this agreement.
  • Revaluation of active members’ benefits in line with CPI + 1.6% .
  • Normal Pension Age equal to State Pension Age, which applies both to active members and deferred members (new scheme service only);
  • Pensions in payment to increase in line with Prices Index (currently CPI);
  • Benefits earned in deferment to increase in line with CPI;
  • Average member contributions of 9.6%, with some protection for the lowest paid;
  • Optional lump sum commutation at a rate of 12:1, in accordance with HMRC limits and regulations;
  • Spouses/Partner pension in accordance with current provisions;
  • Lump-sum on death in service of 3 times FTE salary;
  •  Ill-health benefits the same as  those in the current open scheme;
  • Actuarially fair early/late retirement factors on a cost-neutral basis except for those with a NPA above age 65,  who will have early retirement factors of 3% per year for a maximum of 3 years in respect of the period from age 65 to their NPA; and
  • An employer cost cap to provide backstop protection to the taxpayer against unforeseen costs and risks.