§ Mr. OatenTo ask the Secretary of State for Education and Skills what discussions she has had with the Treasury on the future of the Teachers' Pension Fund. [75980]
§ Mr. Miliband[holding answer 21 October 2002]: The Teachers' Pension Scheme (TPS) is an unfunded scheme. Periodic valuations of the scheme are carried out by the Government Actuary to establish the liabilities and notional assets of the scheme. The valuation determines the contribution rate paid by the employers of TPS members.
With the agreement of Treasury, I am currently consulting teacher and employer representatives and other interested parties on changes to the valuation methodology. Under the existing provisions of the Teachers' Pensions Regulations, the notional fund is deemed to have delivered the average rate of return achieved by the largest invested pension funds. However, likely interest returns to the stock market performance of notional assets is unlikely to produce a stable assessment of the cost of providing public service pensions, particularly over the short to medium term, or to reflect the risks and costs to government of financing the pensions in payment. The Government wishes to reflect these costs more appropriately, remove the financial uncertainty about the performance of notional assets, and provide greater stability in employer contribution rates. I am, therefore, consulting on the proposal that, instead of tracking the returns of invested pension funds, the method of crediting investing returns to the notional fund should be based on a rate of returns which the Government Actuary advises as being appropriate for the valuation of a public service pension scheme. The consultation period ends on 8 November.