Employers' Guide
Section 20 – Arrears of contributions
Contents
1. Background 2. How missing contributions are identified 3. How TP issue Invoices 4. Employers' Responsibilities on receiving an Invoice 5. Retrospective Part-Time Elections 6. Overseas Teachers: Opt Out Forms 7. Interfund Transfers 8. Case Study1. Background
The purpose of this section is to explain the process for the collection of for arrears of contributions in respect of pensionable employment are issued by TP.
Employers are responsible for deducting teacher contributions, and to remit both employer and teacher contributions to TP within seven days after the end of each month. Where an employer has failed to comply with that responsibility and the employment subsequently is identified as pensionable, then arrears of contributions are due.
Where you have not deducted and remitted contributions then the Teachers’ Pensions Regulations allow for the charging of interest, compounded with monthly rests, until the amount is paid. Interest is charged under Regulation 129 at the rate of 3.5% above the rate of RPI.
Where TP identifying that contributions have not been deducted correctly they will issue an invoice for arrears of contributions. These invoices must be paid immediately. Where payment is not received TP may issue a revised invoice which takes into account recalculated compound interest.
Back to the top2. How missing contributions are identified
Missing contributions are identified in a number of ways.
- A teacher who receives their annual benefit statement, and queries a period of ‘missing’ service. If this service was pensionable TP will generate an invoice once the exact service and salary details have been provided by the relevant employer.
- You may identify that a teacher has “missing” service and provide TP with the necessary service and salary details on request so that an invoice can be issued.
- HMRC inform TP that a teacher is paying National Insurance contributions at a rate which indicates that they should be a teacher of the TPS.
Where appropriate TP will write to the employer to obtain service and salary details before issuing an invoice for the arrears of contributions.
Back to the top3. How TP issue Invoices
TP issue invoices to designated contacts. Where, for example, no contact exists in relation to independent schools the invoice will be addressed to the School Bursar. In the case of LAs, the default position in lieu of a designated contact is for invoices to be issued to the person providing the service and salary information. If you would like TP to issue invoices to a designated contact point then please email: tpcontributions@capita.co.uk.
Where a teacher is still working for you will be invoiced for both teacher and employer contributions. Where a teacher is no longer employed by you TP will invoice you for the employer contributions (plus compound interest on the employer contributions only) and invoice the ex-teacher for the teacher contributions separately.
Back to the top4. Employers' Responsibilities on receiving an Invoice
You must make payment immediately on receipt of the invoice to avoid the possibility of further interest being added to the amount. TP will issue a prompt after 14 days as a failsafe to ensure the invoice was received and is being processed.
Back to the top5. Retrospective Part-Time Elections
Where a retrospective part-time election is agreed payment is required within 6 weeks of the date of acceptance. If the invoice is not paid within 29 days interest will be charged. Where one or more parties fail to make the payment within the six-week period, then the invoice will be cancelled and any monies received from one party but not the other will be refunded, and the service will not be recognised as pensionable.
Back to the top6. Overseas Teachers: Opt Out Forms
Many overseas teachers are resident in the UK for up to a year and therefore, not qualify for pension benefits due to the two-year qualifying period. You need to provide information to such teachers so that they can make a considered decision to remain in or opt out of the TPS. If the teacher decides to opt out they should submit an election to opt out of the scheme via My Pension Online (our secure website).
Unless an opt out form has been received and validated by TP, the teacher is a member of the TPS. Where in doubt you should deduct and remit contributions to TP.
Back to the top7. Interfund Transfers
Where an employee has been incorrectly contributing to the Local Government Pension Scheme (LGPS) when they should have been a member of the TPS the contributions from the LGPS should be paid to the TPS. This known as an interfund transfer. TP will issue an invoice for the payment.
Back to the top9. Case Study
The average arrears invoice TP issue amounts to £4,800 and the table below illustrates how compound interest increases when invoices are unpaid:
Late Payment of one year - 8% compound Interest charged on £4,800 with monthly rests |
||||
| Month 1 | Month 2 | Month 3 | Month 4 | |
|---|---|---|---|---|
Amount due |
£4,800.00 |
£4,832.00 |
£4,864.21 |
£4,896.64 |
Interest charged |
£32.00 |
£32.21 |
£32.43 |
£32.64 |
Cumulative interest |
£32.00 |
£64.21 |
£96.64 |
£129.28 |
| Month 5 | Month 6 | Month 7 | Month 8 | |
Amount due |
£4,929.28 |
£4,962.14 |
£4,995.23 |
£5,028.53 |
Interest charged |
£32.86 |
£33.08 |
£33.30 |
£33.52 |
Cumulative interest |
£162.14 |
£195.23 |
£228.53 |
£262.05 |
| Month 9 | Month 10 | Month 11 | Month 12 | |
Amount due |
£5,062.05 |
£5,095.80 |
£5,129.77 |
£5,163.97 |
Interest charged |
£33.75 |
£33.97 |
£34.20 |
£34.43 |
Cumulative interest |
£295.80 |
£329.77 |
£363.97 |
£398.39 |
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