Employers' Guide
Section 6 - Increasing Pension Benefits
Contents
1. Additional Pension 2. Past Added Years 3. Current Added Years 4. Family Benefits 5. Protection of previous salary1. Additional Pension
Members can elect to purchase additional pension provided that they are in pensionable teaching employment. They can do this by either paying a lump sum or having additional contributions deducted from their salary. They are able to claim tax relief on the additional contributions. If a member is interested in this option please give them a copy of the Additional Pension fact sheet. Additional pension may be purchased either for personal benefits or for personal and family benefits but not solely for family benefits.
The maximum annual pension a member can buy is £5,000 but this is reviewed annually in line with the retail price index. Members can choose to buy this at different times in multiples of £250 of annual pension.
They can choose to make a one off payment or have deductions taken from their salary. If members choose to have deductions from salary TP will issue employers with a letter stating the amount to be deducted and the period of the election. If a member goes part time they will pay the same amount of contributions as they did when they worked full-time. The contribution period if paying by instalments must be completed before NPA.
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 members and employers in advance of any changes that are to be made to deductions
You may purchase additional pension on behalf of the member but payment must be made in one sum.
If a member is out of service for 30 days or more the election ceases to have effect. You should notify TP who will calculate how much additional pension the member is entitled to receive based upon the contributions paid up to the day they leave the scheme. They can, however, make a one off lump sum payment to clear the outstanding contributions.
If the member retires before the end of a payment period they will be able to complete the payments by making a one off payment or can receive a pension based upon the contributions made up to the time they retire.
Back to the top2. Past Added Years (PAY)
These were arrangements that allowed members to purchase additional service in the TPS. This provision no longer exists but existing contracts are being honoured.
If a member has a Method A election contributions should continue to be collected until the end of the payment period. If a member changes from full time to part time employment and remains in the Scheme contributions should continue to be deducted but at a pro-rata rate which cause the payment period to be extended. No other changes or amendments are permitted to these elections. If a member is out of service for 30 days or more the election ceases to have effect.
Back to the top3. Current Added Years (CAY)
These were arrangements that allowed members who had left teaching to continue contributing to the TPS by paying both their share and the employer’s share of contributions. These arrangements no longer exist but existing contracts are being honoured.
Back to the top4. Family Benefits
All pensionable service from 1 April 1972 (for widow or dependant) or 6 April 1988 (for widower or registered civil partner) or 1 January 2007 (for nominated unmarried partners) automatically counts for long term pensions.
If the member wishes to increase the value of their long term pension they will need to purchase all or part of their service before these dates. They can only make an election within:
- six months of first returning to pensionable employment after marriage or registering a civil partnership and have not been employed for any continuous period of six months from 26 June 1973 (for widow’s), 1 October 1988 (for widower’s) or from 21 December 2005 (for registered civil partner’s);
- six months of their marriage or civil partnership registration while in pensionable employment;
- six months of the date of nomination of the partner or dependant.
If the members want to apply to cover additional service they should complete an application form.
They can purchase the additional service by either making a one off payment or deductions from their salary. If a member chooses to have deductions from salary TP will issue you with a letter stating the amount to be deducted and the period of the election.
An estimate of the costs involved can be obtained using the calculation package on the website.
Back to the top5. Protection of previous salary
There were two options available prior to 1 January 2007 whereby members could protect a previous higher salary for pension purposes. These were:
- Stepping down applications; and
- Paying contributions on a former higher salary
Neither of these arrangements are now allowed but existing arrangements are being honoured.
If a member has an existing arrangement to continue to pay contributions on the former higher rate of salary, these are revised each year with the retail price index.
The additional contributions are calculated at the current rate of 20.5% of the difference between the current salary and the index-linked former salary. The member is responsible for paying both the teachers and the employer’s share of the contributions.
If an arrangement had been accepted TP will have already instructed you to collect the additional contributions on the former higher salary. Each year you will be notified of the notional salary to use following index linking.
The election will cease to have effect if the member writes to TP indicating their wish to cancel or, if they cease to be in pensionable employment for more than six months.
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