Employers' Guide
Section 10 – Calculating Abatement of Pension
1. Background
Where a teacher takes up further teaching employment after retirement, that employment will be pensionable unless the member opts out of the scheme. Where the retirement was not on the grounds of phased retirement, a certificate of re-employment must be completed by them and you. If a retired teacher who is already in teaching employment takes up a new contract, that service will be pensionable unless they opt out
If the teacher does not hold a current certificate of re-employment, TP should be contacted. This may happen if more than one period of re-employment is undertaken. After the details have been noted, the certificate will be returned to the teacher for record purposes.
Where the teacher has not retired on phased or ARB grounds, the pension may be reduced or suspended.
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2. How abatement works
The teacher’s pension will be stopped if, in any tax year, their annual pensions plus earnings exceeds the highest salary in their average salary period (‘salary of reference’) plus pensions increase. Their pension will stop during the tax year from the point where earnings plus pension equal ‘salary of reference’, but it will recommence at the start of the following tax year.
The salary of reference and the annual pension for those over age 55 rises with the cost of living each April. The factors to enable you to calculate the relevant increases are shown at Appendix 7.
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3. Case studies
Example 1
Re-employment commences on 6 April on an annual salary of £30,000. This leaves a balance of £15,000 before the salary of reference (pension limit) is met. If a teacher retired with an annual pension of £12,000, the pension will be paid in full with no abatement. |
|
Salary of reference + pensions increase |
= |
£30,000 |
Less re-employed salary/expected earnings |
= |
£15,000
------------ |
Pension limit |
= |
£15,000
------------ |
Annual pension + pensions increase
------------------------------------------------ |
= |
daily pension rate |
365 |
eg. |
£12,000
---------- |
= |
£32.87
|
365 |
Pension limit
----------------------- |
= |
number of days pension can be paid* |
Daily pension rate |
eg. |
£15,000
------------ |
= |
456 days (i.e. 1 year 91 days)* |
£32.87
|
If * exceeds 365 annual pension not affected. |
Example 2
Re-employment commences on 6 April on a salary of £30,000. This leaves a
balance of £6,000 before the salary of reference is met (pension limit). If a teacher
retired with an annual pension of £12,000 the pension will be suspended between 6 October
to the end of the tax year: |
|
Salary of reference + pensions increase |
= |
£30,000 |
Less re-employment annual salary/expected earnings |
= |
£24,000
------------ |
Pension limit |
= |
£6,000
------------ |
Annual pension + pensions increase
----------------------------------------------- |
= |
daily pension rate |
365 |
eg. |
£12,000
---------- |
= |
£32.87 |
365 |
Pension limit
----------------------- |
= |
number of days pension can be paid* |
Daily pension rate |
eg. |
£6,000
---------- |
= |
182 days* |
£32.87 |
If * less than 365 days annual pension will be stopped.
Review period commenced 6 April (start of tax year) for
182 days = 4 October. Pension suspended from 5 October for remainder of tax year.
In either example the annual pension position will be re-assessed at the
start of the next tax year and the process will be repeated for as long as the
re-employment continues or circumstances change, in which case the position will be
reviewed. |
|
Following the introduction of the amendment regulations on 1 November 1998, all teachers who have retired on age or premature retirement grounds and were in re-employment on or after 1 September 1998, will be assessed.
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