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Following a high volume of questions we have received in relation to the indexation in the final salary section of the Teachers’ Pension Scheme (TPS). We have sought the views of TPS to help inform Employer Link subscribers, in considering whether to take action and if so how best to do it.
For context, the unions have concerns about the potential negative impact on the pension benefits of any teacher or school leader subject to a pay freeze in 2021/22 and in a joint letter, requested that employers pay a recruitment and retention payment of £1 per teacher, to trigger the TPS indexation.
On 1 February 2022, we shared a letter from the DfE (with their authorisation) that was sent to the NASUWT, setting out the DfE’s position on this issue (this was sent by Stephen Cooper, if you did not receive that email please contact info@employerlink.co.uk).
TPS has now added information about TPS indexation and the impact of a pay freeze to their website.
However, employers have had further questions, especially in seeking clarification on when a change of salary should be made, to trigger the indexation (if that is the decision ultimately taken by the employer). We have channelled this point to TPS – and they have agreed the following statement, for us to share.
“Where a teacher is subject to a pay freeze during the financial year 2021/22, a change of salary must occur during that period for indexation to be applied. In that scenario, if a change of salary has not been made by 31 March 2022, under the TPS administration processes, it is possible to report a change of salary retrospectively to trigger the indexation for 2021/22, as long as the teacher has not applied for their retirement benefits before the change is made. Any retrospective change of this nature would need to be consistent with the teacher’s contract of employment and the employer’s pay policy”.
Finally, the TP Scheme Advisory Board (SAB) met on 10 February 2022 to discuss the long-term policy on the operation of the average salary indexation, when the DfE confirmed that the policy is working as intended when this calculation was introduced in 2007 but is considering whether the policy could be revised. The DfE will bring a proposal to the next TPSAB meeting in June 2022. Any change to the TPS regulations will be subject to a public consultation and unlikely to be brought in until 2023.
We are not expecting anymore guidance to be produced, but If we learn anything further that would be of use to employers in dealing with this issue we will share it immediately with you.
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