Employers' Guide

Section 13 - Pension Contributions

The purpose of this section is to instruct employers on the rate of contributions, how contributions are made and how to submit contributions.

1. Contribution rate

TPS contributions are payable by scheme members and their employers. Current contribution rates are 6.4% of contributable salary for teachers and 14.1% of contributable salary for employers. The rates are regularly reviewed by the Scheme Actuary.

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2. Deduction of contributions

Pension scheme contributions must be deducted from the gross contributable salaries of all teachers who are members of the scheme. The responsibility for making correct deductions from a teacher's salary rests with you. Failure to do so means you will need to recover the arrears due from the teacher.

The total of employer and employee contributions must be remitted to TP by 7th of the month following deduction. Where the 7th falls on either a weekend or bank holiday the contributions must be received by the last working day preceding either the weekend or bank holiday. In the event of late payment, interest will be charged. Employers will be liable to pay arrears and interest for periods where incorrect deductions or payments of contributions are made to the TPS.

In addition to the basic contributions, some teachers have elected to pay additional contributions, over and above their basic contributions. Details of these elections are outlined below. The teacher should be able to produce a relevant letter issued by TP, explaining the rate of deduction and the period to which they apply.

Additional pension contributions

This is where a member has decided to purchase additional pension by instalments (set monthly amounts) that are deducted from their salary. These contributions must be noted separately from other contributions on the remittance slip in line I.

As instalment costs will be reviewed at each Scheme valuation the deductions may increase or decrease depending upon the results of the valuation. TP will notify the teacher and you in advance of any changes that are to be made to deductions

Past Added Years (PAY)

The PAY arrangements are no longer available but existing arrangements are being honoured.  These contributions must be noted separately from other contributions on the remittance slip in line G.  Where a teacher is buying additional years of service by instalments (set % deduction of salary) additional contributions must not be deducted from the salary if there has been a break in pensionable employment of more than 30 days.

Care should also be taken that contributions are not deducted beyond the end date of the election. The teacher shouldbe able to provide the date the arrangement ends but in cases of doubt, TP must be consulted.

Contributions on a former higher salary

This provision is no longer available but existing arrangements are being honoured. Contributions in respect of these elections are classed as ‘additional contributions’ (not Additional Pension) and should be deducted from the teacher's salary and submitted with the monthly remittance of all other contributions to TP. The contributions should be recorded with other extra contributions in line G of the remittance slip.

Additional contributions for family benefits

If the teacher wishes to increase the value of their dependant’s pension they may make payments by instalments that are deducted from their salary. Contributions in respect of these elections are classed as ‘additional contributions’ (not Additional Pension) and should be deducted from the teacher's salary and submitted with the monthly remittance of all other contributions to TP

Additional Voluntary Contributions (AVCs) with Prudential

A teacher can also pay additional contributions into the Scheme's AVC provision with Prudential either as a percentage of salary, or at a set monthly amount. These contributions should be remitted directly to Prudential Financial Services.

Instruction for deduction from salary and remittance of contributions to Prudential can be found in the Prudential AVC Facility Employers Manual, a copy of which can be obtained from

Prudential Financial Services
Teachers’ AVC Administration
Prudential
Craigforth
Stirling
FK9 4UE

Telephone: 0845 6000 343.

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3. Refund of contributions deducted in error

If you become aware that TPS contributions have been deducted in error from current financial year salaries or a member has opted out of service within 3 months of taking up employment, you should make the necessary refund including income tax and National Insurance adjustments via the payroll. This is not a repayment of contributions which is undertaken by TP subject to certain conditions after a member has left pensionable teaching.

If you become aware that TPS contributions have been deducted in error from previous financial years you should make the necessary refund to the teacher. HMRC have confirmed that, in such circumstances, there is no obligation on you to deduct income tax from the refund. The refund will be treated as taxable income received by the teacher in the tax year of payment. It is the teacher's responsibility to report this on their tax return.

If you do deduct tax, it should be deducted at the basic rate and again the teacher should report this on their tax return.

HMRC have confirmed that, if NI contributions have been deducted erroneously in tax years prior to the current year, you should write to your local HMRC office to inform them of underpayments or overpayments of NI contributions.

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4. Residential emoluments

The Teachers' Pensions Regulations allow the value of free accommodation to be included in contributable salary where you have agreed this with TP. This arrangement is known as a 'residential emolument'.  You have 3 months from the start of the employment or from when the accommodation becomes available to agree the emolument with TP.

The valuation used consists of current gross annual value of the residence, as certified by an estate agent, i.e. the rental value of the property if let on the open market, subject to a limitation of one-sixth of contributable salary. In addition to this valuation, the annual Council Tax and costs of amenities (e.g. heating, lighting and water) may be added if these are provided free of charge. TP will consider the incorporation of a residential emolument upon written receipt of the above information.

Where a residential emolument is accepted as part of contributable salary, pension contributions are payable on it, by both the scheme member and you from the date of occupancy of the property and it continues to form part of contributable salary so long as it is received by that teacher.  The emolument should be reviewed every 2 years.  If this is not adhered to the agreement may be rescinded and the contributions refunded.

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5. Payment of contributions to TP

The Teachers' Pensions Regulations require employers to remit the contributions deducted from teachers' salaries and their employers' contributions to TP within 7 days after the end of the month to which the contributions relate. Where the 7th of the month falls on a weekend or bank holiday the contributions must be received by the last working day preceding either the weekend or bank holiday. This should be done by electronic transfer, cheque or at the counter of a bank. Electronic transfer guarantees payments are received.  At least 3 bank working days must be allowed for all payments made at the counter of a bank.

If all contributions due are not received within 7 days of the last day of the month to which they relate, compound interest will be calculated for each day's delay.

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6. Documentation relating to payment of contributions

It is important that the correct paying-in slip is completed each month providing an accurate statement of the contributions that are being paid together with the contributory salary bill on which the contributions are based.  This should be completed and submitted on STU.

It is essential that the teachers’ and employer contributions collected equate to 6.4% and 14.1% of the total actual contributory salary. If not, you need to provide an explanation giving the reasons for the variance. TP monitor monthly payments and failure to pay over the correct rates or provide a reasonable explanation for any variance will result in a report to the DfE who will determine appropriate follow up action.

Remittances must be made to TP on or before the 7th day of the month following the month the contributions relate to. The paying-in slips, showing the breakdown of payment, must be submitted to TP to arrive no later than the actual payment. The paying-in slips must be completed regardless of the method used to submit payments.

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