The Teachers’ Pensions Regulations 2010

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations revoke the Teachers’ Pensions Regulations 1997 (“the 1997 Regulations”) and regulations which amend the 1997 Regulations. The regulations revoked are listed in Schedule 12.

The Regulations re-enact the provisions of the 1997 Regulations as amended with drafting amendments including new concepts and re-ordering of some provisions and some changes of substance. The principal changes of substance are as follows.

Pensionable employment (Part 2)

Regulation 7 provides that a person who is on adoption, maternity, paternity or parental leave is only in pensionable employment if the person is in receipt of at least half salary or statutory pay.

Regulation 10 brings together all the provisions providing for a person to make an election that employment should be pensionable. The effect is therefore that there is now a time limit on electing that employment in Part 2 or 3 of Schedule 2 should be pensionable.

Regulation 12 makes specific provision for part-time employment between 8th April 1976 and 1st May 1995 to be pensionable. An election for this purpose must be made before 1st September 2012. Currently, if a person wishes such employment to be pensionable that person has to make a claim under the Equal Pay Act 1970 which is either litigated or settled.

Regulation 13 provides for additional grounds for accepted schools - which are, broadly speaking, independent schools - to lose their accepted status.

Contributions (Part 3)

Regulation 15 provides additionally that paid parental leave is pensionable.

Regulation 16 introduces new requirements to be satisfied if the value of residential accommodation is to form part of contributable salary. There is now a time limit on requests for the value of such accommodation to form part of contributable salary, and the employer must carry out regular reviews of the value of the residential accommodation.

The option in regulation C16 of the 1997 Regulations to return repaid contributions in instalments is not re-enacted; however, savings provisions in Schedule 13 allow for existing payments in instalments to continue.

Schedule 3, which brings together employers’ and employees’ contributions, contains provision whereby the Secretary of State can decide that there should be tiered employee contributions.

Schedule 4 which relates to the payment of contributions for an additional pension now also provides that the former employer of a person whose final salary has been restricted under regulation 39 may elect within 6 months of the end of the employee’s employment to pay a lump sum to provide an additional pension for the former employee.

In Schedule 5, which relates to contributions for family benefits, the restriction whereby a woman had only one opportunity to elect to pay additional contributions to cover her pre-1988 service has been removed.

In regulation 28, new provision is included under which the employer is obliged to pay employees’ contributions which the employer should have deducted irrespective of whether such contributions have been deducted. Contributions are only recovered directly from the employee if any are still due after the employee has left the employment.

Regulation 30 contains a new provision whereby, if any payment of contributions required from the employer is not made on time, a further payment of up to £100 may be required (in addition to interest at the standard rate – see below).

Transfers (Part 4)

Regulation 34 is a new provision which gives the Secretary of State power to reduce a person’s transfer value if a lifetime allowance charge arises for which the Secretary of State has a liability.

Average salary (Part 5)

Regulation 39 contains new provisions on the restriction of average salary where there have been substantial increases in the last 3 years of pensionable employment. In place of a restriction by reference to the “standard increase” this regulation imposes a restriction by reference to increases of more than £5000 (index linked) or 10%. As at present, the Secretary of State must repay contributions referable to the “excess” salary (regulation 26).

Benefits (Parts 7 to 10)

In regulation 57, which provides for an election to receive phased retirement benefits the minimum percentage by which a person’s contributable salary must reduce to enable a phased retirement election is changed from 25% to 20%. Also provision has been made to disregard a standard increase (defined in paragraph (13)(a)) awarded to a person on the first day of a phased retirement period or (where the person enters new employment) before the person takes up the new employment.

In regulation 59, reflecting the first change in regulation 57 the threshold which would cause a phased retirement pension to fail is raised from 75% to 80%.

Case B in regulation E4 of the 1997 Regulations is not re-enacted (but Cases C (ill-health retirement), D (premature retirement) and E (early retirement with actuarial adjustment) which are in Schedule 7 to these Regulations are not re-lettered).

Regulation 71 deals with enhancement of pension where a person has previously been entitled to an ill- health pension, returns to pensionable employment and then becomes entitled to retirement benefits. Paragraph (9) of this regulation makes it clear that where a person, on returning to pensionable employment is a person with mixed service then the enhancement is calculated on the basis of a person’s normal pension age of 65 (1/60th of average salary for each year of reckonable service and no lump sum).

Regulation 72 is new and gives power for the Secretary of State to reduce a pension if the combination of enhancement under regulation 71 and total incapacity benefits result in a pension which appears excessive in the light of the period up to the date on which the person would normally have retired.

Regulation 78 is new, and provides for an annuity to be paid where a person is entitled to repayment of contributions which cannot be paid because such a payment would be an unauthorised payment under the Finance Act 2004.

Regulation 79. The ill- health grant can only now be paid under this regulation if a person has a limited life expectancy. Accordingly, the name of the grant has been changed from a “short-service incapacity grant” to a “short-service serious ill-health grant”. Under the 1997 Regulations, if a person received a short-service incapacity grant but then returned to pensionable employment and became entitled to retirement benefits, the short-service incapacity grant would be deducted from the lump sum. This provision is not re-enacted; instead if a short-service serious ill-health grant has been paid in these circumstances the person is treated as having entered further employment (regulation 4).

Regulation 83. A change is made so that a death grant can be paid where a person is in a reserve force who was paying contributions became incapacitated but died within 12 months (and before payment of an incapacity pension is initiated).

Regulation 105 contains new provisions under which a pension credit member may draw a pension at the age of 55. Such a pension is actuarially reduced.

Other provisions

Regulation 112 (interest on late payment of benefits) contains a new provision that the Secretary of State need not pay interest if there is a delay in the Secretary of State being given evidence of continuing entitlement to a pension. This is linked to regulation 115.

Regulation 114 is new and gives express power for the Secretary of State to cease to pay, withhold, or recover payment where there was no entitlement.

Regulation 115 is also new and provides that the Secretary of State may require evidence of continuing entitlement to benefits. If such evidence is not produced, benefits may be withheld.

Regulation 116 now provides additionally for a pension credit member to be able to commute part of a pension into a lump sum.

Regulation 119 which provides for the commutation of small pensions has been extended so that a family member can commute a small family pension.

Regulations 123 and 124 are new. Regulation 123 provides that where there is a liability on the Secretary of State to pay a lifetime allowance charge, the Secretary of State must pay it and make a corresponding reduction in benefits. Regulation 124 contains a general prohibition on unauthorised payments under the Finance Act 2004.

Under regulation 128, the actuarial review of the Teachers Pension Budgeting and Valuation Account need not be laid before Parliament.

A new standardised rate of interest is introduced (regulation 129) which applies to late payment of contributions and payment of back contributions where an election that employment is to be pensionable is backdated. The rate is related to the increase in the Retail Prices Index plus 3.5% (and it is 3.5% if the Retail Prices Index has decreased). Transitional provisions in Part 4 of Schedule 13 cover the position up to 1st December 2010.

The amendments to the Teachers (Compensation for Redundancy and Premature Retirement) Regulations 1997 include an amendment raising the minimum age which has to be reached to be entitled to compensation under those Regulations from 50 to 55 (Schedule 11, paragraph 13(a)).