Proposals for implementation of the reformed Teachers Pension Scheme in 2015

Transcription

1 Proposals for implementation of the reformed Teachers Pension Scheme in 2015 Response of the Association of School and College Leaders A Introduction 1 The Association of School and College Leaders (ASCL) represents over 17,000 heads, principals, deputies, vice-principals, assistant heads, business managers and other senior staff of maintained and independent schools and colleges throughout the UK. ASCL has members in more than 90 per cent of secondary schools and colleges of all types, responsible for the education of more than four million young people. This places the association in a unique position to consider this issue from the viewpoint of the leaders of secondary schools and of colleges. 2 ASCL welcomes the opportunity to comment upon these proposals which are of great importance to our members. The implementation of the detail of the post 2015 scheme will have a significant role in determining the impact of the scheme architecture on scheme members. ASCL would also wish to recognise that the Department for Education (DfE) has responded to some of the concerns raised during the discussion forum meetings. 3 However, it is disappointing that there are no proposals over post 2015 contributions. This is a key issue for ASCL members and, notwithstanding the current work on scheme valuation, needs to be addressed sooner rather than later. 4 ASCL notes and welcomes the invitation (issued after the publication of this consultation) to the teacher unions to discuss contributions for and post For the sake of completeness ASCL s views are reiterated below. 5 It is fully understood that this consultation is on the implementation of the proposed scheme and this response will address this issue and the specific questions posed. Responding does not imply total acceptance of all aspects of the post 2015 scheme or the process that has delivered it. 6 Our remarks are organised in sections as follows: A Introduction B General comments C Contributions D The specific questions E Conclusion B General comments 7 It is acknowledged that the change to a CARE scheme will inevitably require a change in regulation and practice. However, for aspects of the current scheme that work well the new regulations should reflect current practice as closely as is practical. There will be many scheme members with service in pre- and post-2015 schemes (some may be in the pre-2007 scheme, the 2007 scheme and the 2015 scheme). For the stated aims ASCL Page 1 of 7

2 of clarity and encouraging members to be pro-active towards their pensions the benefits of familiarity and current understanding must not be underestimated. 8 This is an opportunity to streamline and improve some aspects of current practice. ASCL appreciates the movement on, for example, aspects of ill-health retirement. But this should not be an excuse for further changes in policy that were not in the Final Agreement without appropriate consultation. 9 It is assumed that where there has been no specific reference to a scheme provision it remains the same as now. For example, the ability of employers to purchase additional pension on behalf of an employee is very important to ASCL. The section on flexibilities makes no reference to this. C Contributions In the Background and context paragraph at the beginning of the consultation document it states Lord Hutton also said a career average scheme is a fairer way of calculating pension benefits, because members get broadly the same amount of pension for every pound put in. The imposition of a tiered contributions structure does not fit with this. Tiers are not necessary or appropriate in a CARE scheme. 11 The impact of tax relief has been quoted as a reason for maintaining tiers. But tax relief arrangements could be changed without reference to any specific pension scheme. Given the intention for the new scheme to run for 25 years it would be both unwise and inappropriate to predicate a contributions structure on this. 12 ASCL has expressed its deep concerns over the impact of raised contributions and the change to a CARE scheme on school and college leadership. The members most affected by these changes are also potentially affected by the lowering of Annual Allowance and Lifetime Allowance thresholds, the removal of child allowance and other fiscal changes. 13 School and college leaders are driven by many motivations; vocation, passion, a desire to make a difference and a lifetime commitment to young people. Remuneration is not top of this list by a long way but its erosion has a negative impact on morale. This is especially true at a time when leaders are being asked to deliver so much change and to continue to raise standards with diminishing resources, and yet are so personally and professionally vulnerable because of the current Ofsted regime. These issues cannot be separated; an individual leader has a single, total experience which brings all these elements together. 14 Recruiting and retaining the highest quality leaders is absolutely essential to the wellbeing of our schools and colleges. The tiered pension contributions run the risk of contributing further to a potential reluctance amongst the most talented teachers to seek senior leadership posts. D The Specific Questions Question 1 Are the proposed arrangements clear, and, if they are not, what further guidance or support would be helpful? 15 The proposals do offer clarity. This is helped, in part, by the nature of the proposed scheme. The concept of a CARE scheme, however, is new to many and a lack of familiarity could potentially raise issues in the early stages of implementation. For employers and members dealing with up to three different schemes will also be a ASCL Page 2 of 7

3 challenge. The use of clear worked examples in this paper is very useful as is the provision of web based tools. A full complement of such aids would be extremely useful. Question 2 Are there any further issues the department needs to consider in deciding whether or not to take account of residential emoluments as part of scheme members pensionable salary 16 ASCL understands the concerns over liability for matters beyond the department s control. Our view is that teachers working in recognised schools are teachers, and the scheme should apply to all. It has been accepted that teachers with a residential requirement in the state sector can have any such allowance pensionable. The same should apply to other teachers. The emolument is part of the teacher s overall remuneration. Tax is paid on this amount, as are employer and employee contributions. This is an important part of the negotiated remuneration when taking a post. It many smaller independent schools there are limited numbers of staff carrying out these duties and the schools are dependent upon them. Not only will the removal of the emolument disadvantage the member, it may lead to salary inflation as employers move to maintain equivalence for their staff. 17 If the department is determined to go ahead with this proposal to make these payments non superannuable it should seriously consider maintaining current emoluments and not making any change to those who accepted posts on this financial basis. They would experience considerable detriment compared with their expectations. Question 3 Will the proposals help employers and scheme members to do more to ensure the accuracy of pension-related data and thus benefits? 18 This issue goes beyond the nature of the proposals. Employers have a legal and moral duty to maintain accurate records. The growing diversity of school and college governance with the associated growth in the number of individual employers may be an issue, especially for scheme members who move between different categories of employer. Members will need encouragement and help in taking responsibility for their pensions. This is a cultural issue; making demands of members (eg time limits on reporting errors) is not the same as empowering them. School and college leaders are hugely committed to their institutions and their students. This is their priority and there has not previously been a perceived need to engage on a regular basis with their own pensions. 19 The creation and maintenance of pension accounts will be crucial, as is the need to move towards real time data as far as is possible. The key to much of this will be the capacity of Teachers Pensions (TP) to obtain accurate data from employers on time, process it and make it available in a comprehensible form to members. Similarly, there must be the appropriate capacity and knowledge to respond to what may, initially, be a high demand for help and advice from members. 20 The proposals are the basis of the operation of the scheme; it is the implementation that is critical. Question 4 Are the proposed arrangements for death grants and dependents benefits clear and, if not, what further guidance or support would be helpful? 21 The proposed arrangements are clear. As in paragraph 0 above, the use of worked examples is effective. ASCL Page 3 of 7

4 Question 5 Do you agree that the department should amend the arrangements for enhancing dependents pensions where a scheme member dies in service to better target them to those in most need, in line with the ill-health retirement arrangements? 22 There is logic in aligning death and ill-health benefits and also an advantage in members understanding if there is consistency. This proposal will benefit those who have not yet accrued a significant pension and most likely the groups with children who are still financially dependent. ASCL would support the broad principle but would make the observation that this is a further change which impacts upon school and college leaders. Question 6 Will the department s proposals for calculating ill-health benefits and short service serious ill-health grants ensure scheme members continue to be appropriately supported, or is there anything else the Department needs to consider? 23 ASCL thanks the DfE for the time given to discussing a range of issues around ill health and taking the opportunity presented by this exercise of making improvements. At the same time ASCL welcomes the replication of many existing arrangements which serves to both support members and contributes to their understanding of the provision. The two tier arrangements and short service ill-health grants are also welcomed. It is noted, however, that the pension accrued at the time of an ill health application may be less than under a final salary scheme thus reducing the overall value of the benefits. Question 7 Will the Department s proposals for extending the time limits for making an in-service retirement application be sufficient to appropriately help those with difficult- to-diagnose or degenerative illnesses? 24 This is a most welcome move. Those with slow developing conditions, or conditions that are now treatable with advances in medicine but require time for recovery will benefit greatly. As the retirement age rises it is likely that more serving teachers will experience health problems whilst in service. The two year window serves to both protect those who may deteriorate over time and also may avoid precipitous applications as there is time to seek a means of recovery. Question 8 Are the proposed arrangements sufficiently clear to help ensure that scheme members and employers can effectively manage the transition to the new arrangements. 25 The arrangements are sufficiently clear. It is important, as noted elsewhere above, that the guidance is explicit and precise. These proposed arrangements are, and must be, clear enough for accurate interpretations to be given to members with queries. This is an area which concerns members as much as or more than any other aspect of the proposed 2015 scheme. There is considerable scope for confusion with members being in one, two or even three schemes and they must have confidence in the advice coming from Teachers Pensions. Question 9 Do you agree that transitional scheme members who have passed their final NPA and move within the public service should have the option to transfer their benefits provided their new pension scheme is within the Public Sector Transfer Club? ASCL Page 4 of 7

5 26 ASCL agrees with this proposal. It is a matter of principle to give people as much flexibility in managing their pensions as practical and as more people work longer with more career changes, this provision may be a significant benefit to some members. Question 10 Do the Department s proposals for the operation of faster accrual provide scheme members with sufficient flexibility whilst also being practical to administer by employers and payroll providers? 27 ASCL maintains that it is vital to maintain and introduce the maximum number of flexibilities if members are to be encouraged to be more pro-active in managing their pensions. The impact of pension reform on school and college leaders has been a consistent thread in ASCL submissions and the issue has been rehearsed earlier in this document. Flexibilities can be used to mitigate some of the adverse factors. Faster accrual is a welcome addition to the means of increasing one s pension provision. It is accepted, however, that an unstructured approach would be extremely complex to administer and ASCL accepts the concept of three alternatives. Those proposed appear adequate but this may need reviewing in light of experience as the scheme progresses. Question 11a Should the option to buy-out the actuarial adjustment feature in the reformed scheme? 28 ASCL would wish for this provision to feature in the reformed scheme. There is a clear concern amongst ASCL members about the prospect of having to work longer. For some this will mean a review of long term plans they may have had. This provision may make retiring at the currently expected age more economically viable for members. Question 11b Do you agree with the department s proposals for the operation of this option? 29 ASCL welcomes the wording available to the member when first joining the reformed scheme. It is taken that this will apply to all members, at all stages of their careers, on entering the reformed scheme, even if it is after accruing in previous schemes. 30 It is hard to imagine that new entrants to the profession in their early twenties, with student debt and rising housing costs, are likely to commit to this forty years before the event. Those who have planned on a retirement at 65 and then transfer into the new scheme later in their careers are those most likely to want to take advantage of this opportunity. Question 12 The intention is to ease the administrative burdens on existing arrangements, especially for MATs. Do the proposals outlined in this section address the issues? If not, why not? 31 This would seem a common sense proposal which ASCL would accept. Is it, however, to be limited to Multi-Academy Trusts (MATs)? There are federations of schools which are not part of MATs and independent school chains. These schools should also be included in this arrangement. It is not just that the administration is eased. It gives security and confidence to those scheme members who work across a number of schools in such grouped arrangements. ASCL Page 5 of 7

6 Question 13 Do you agree that the proposed PRC arrangements will appropriately assist employers and members where early termination of employment is being considered? 32 ASCL would strongly argue for the retention of these provisions. As schools and colleges become ever more self- governing the need to be able to manage staff and staffing at a local level rises accordingly. These provisions make it possible for schools and colleges to adjust their staffing yet allow staff to leave employment with some dignity and financial security. Question 14 Does the proposed remit, structure and operation of the Board provide scheme members and employers with assurance over the administration of the scheme 33 These provisions could provide this assurance; the issue is in their implementation. The power residing with the Secretary of State, the presence of DfE officials as board members and the nature of the appointed members will all shape how the board functions in practice. 34 The proposal that unions, employer groups and other stakeholders nominate within their sector is useful and this needs to be discussed further and an appropriate process formulated. 35 There will need to be a realistic view taken of what can be expected of a board of volunteers with a framework of quarterly meetings (plus sub committees). It would not provide assurance if the board s activities were spread so thin that they became superficial or so intense that the time demands led to a difficulty in recruiting and retaining members. Question 15 Will the proposals ensure that TPS continues to help employers to help scheme members manage effectively their careers and retirement? 36 It is helpful that the proposals are relatively straightforward and well expressed. As stated previously, it is the implementation that will be the key to this. The rapid growth in self- governing schools and colleges is increasing the number of employers TP has to deal with. The capacity to interact with this new employer audience, and the power (and willingness to use it) to insist on accurate data on time is essential. The proposals are manageable; they have to be managed effectively. Question 16 Will the proposals help scheme members to manage effectively their pension savings and plans? 37 As stated previously, there is a cultural shift necessary to develop proactive approaches from scheme members towards their pensions and pension planning. Again, this largely depends upon the quality of literature, website tools and direct support from TP together with clear expectations on what is expected of employers. 38 The transitional arrangements and scheme flexibilities are very welcome as these do provide the means for members to better manage their pensions. ASCL would be strongly against any diluting of these measures. Question 17 Are there any additional administrative, equality or practical issues that the department needs to consider in implementing the new arrangements? ASCL Page 6 of 7

7 39 The greatest needs will be for clear descriptions and explanations for employers and members, and TP having the capacity to deal with a great number of enquiries as the transition phased begins. E Conclusion 40 The proposals are largely consequences of the change to a CARE scheme, or common sense responses to it. ASCL is, therefore accepting of many of the proposals. These include transitional arrangement, ill-health arrangements and death and family benefits. 41 ASCL would ask for confirmation that the flexibilities are to be maintained as proposed, and that the ability to buy out the actuarial adjustment is available to all on entering the new scheme. 42 Contributions, which are not covered by this consultation, remain a major concern to ASCL and a discussion on this should not be delayed once the valuation is complete. 43 I hope that this is of value to your consultation, ASCL is willing to be further consulted and to assist in any way that it can. Martin Ward Public Affairs Director 24 June 2013 ASCL Page 7 of 7