In 2021, the education unions alerted the Department for Education (DfE) to the potential impact the pay freeze could have on how some final salary pensions were calculated, due to a 'quirk' in the regulations.
This 'quirk' meant that certain calculations needed to be triggered by a change in the rate of pay, which wouldn't occur for some members affected by the pay freeze in 2021/22.
Ongoing discussions have taken place over the last year with the DfE regarding the possible amendment to the ‘average salary’ calculation as set out in the 2010 regulations where indexation is applied only when there is a change to a member’s salary.
The DfE has finalised a proposal that from a future date (following an amendment to regulations):
- indexation would change from whenever there is a change in pay to one fixed point per year – either April or September, and
- an annual revaluation method is introduced from a transition date. Where the 10-year period overlaps the transition date, revaluation ‘trigger’ points will be applied in accordance with the approach in force at that point in time. This will delay the eventual transition to a fully annualised approach to salary revaluation for 10 years (until the existing approach phases out).
