Teachers Pension Flexibilities, increased substantially today

IAMIAM

Its costs nearly 30% more for APB and Faster Accrual has become extortionate. 
I presume this will be the case for all civil service pension flexibilities....

Universidad

Suspect this is down to the change in the discount rate last year. First noted in this thread. 

This affects the price of buying additional pension benefits, and will affect all the public sector pensions.

I think the expectation was initially that it was likely there would be a mid-year change to adjust cost of Added Pension to align with the new discount rate, but it seems like in the case of the Civil Service Pension Scheme, and apparently the TPS as well if what you're telling us is right, then the effective change has been made from April 2024.

The SCAPE rate shifting from CPI + 2.3% to CPI + 1.7% has a fairly dramatic effect on the cost of additional pension.

For me it's a significant factor in switching to AVCs from Added Pension, in order to get myself below the higher tax rate. But the other factor is that I'm likely to need to change my working pattern, so didn't want to lock in to a large amount of Added Pension over a whole year (and AVCs can be changed on a monthly basis if needed).

IAMIAM

I buy £250 APB each year while I am in service and pay over 12 months.
£250 APB cost me £195 per month on 1st March, now £260 per month from 1st April when I purchase again for this year....

Universidad

For someone of about my age, the difference when buying £250 pounds of (self and dependents) Added Pension over a year with the Civil Service scheme has changed from £230 per month to £280 per month.

Real terms you would expect to get about £4000 out if you live to 84. The cost of purchasing this has risen from 2760 to 3360.

This starts to look less attractive when compared to other options. Not to mention, of course, the psychological factor of paying more for the same thing, which in life seems to be an inevitability.

IAMIAM

Will these costs for APB ever decrease? I presume not

hugheskevi

IAMIAM said:

Will these costs for APB ever decrease? I presume not

Costs are higher the older a member is, so even if nothing else changes then the cost will be higher for an individual each year.

If the discount rate increases (ie if forecast GDP improves or the basis of the discount rate is amended), life expectancy falls sufficiently, state pension age is increased sufficiently, or the benefits purchased with APB are diminished due to policy change (eg detrimental change to revaluation/indexation), then the costs could fall.