Employers' Guide
Section 7 - Retirement (other than Ill Health)
Contents
1. Introduction to the retirement arrangements 2. Age retirement 3. Actuarially reduced benefits retirement 4. Phased retirement 5. Premature retirement 6. The application processThe Premature Retirement Application form is available for download here:
Application for Premature Retirement Benefits (PDF)
1. Introduction to the retirement arrangements
Retirement is the culmination of a career in education. To ensure this event is handled efficiently and satisfies the member’s expectations of receiving their benefits on time it is essential that you work closely with the member and TP to achieve this. This section describes the various retirement options for scheme members. It also outlines the application process and the employer's role in this.
Where members approach you about retirement you may wish to make them the following:
- the real time estimate of the member’s personal TPS benefits and state benefits available on the TP website;
- the fact sheets Planning for Retirement, Returning to Work after Receiving Pension Benefits, Ill Health Benefits and Average Salary.
- the leaflet Retirement Arrangements and Planning and Ill Health Retirement Benefits;
- the relevant application form, the different retirement options are given below.
The retirement options available in the TPS are summarised below and each is explained in more detail later:
- Normal age retirement - at age 60 or 65 (depending upon whether the member joined the scheme before or after 1 January 2007) or on ceasing teaching employment after these ages.
- Actuarially reduced benefits (ARB) - this is available from age 55. The applicant requires your consent if they apply while still in employment;
- Phased retirement – this is available from age 55 and is where the member takes a proportion of their retirement benefits and continues working on a lower salary. The applicant requires your agreement;
- Premature retirement - this is available from age 50 on the grounds of redundancy or in the employer's interest. You must certify the grounds for retirement and agree to pay statutory compensation;
- Ill health retirement - this is subject to medical evidence being accepted by the medical advisors appointed by the DCSF that the person is permanently incapable of teaching. Full details are provided in Section 8.
2. Age retirement
The NPA for a teacher is dependant upon whether the member joined the scheme on or before 1 January 2007. Where a teacher was a member of the TPS before 1 January 2007 their NPA is 60. Where a teacher joins the scheme for the first time on or after 1 January 2007 their NPA is 65.
If a deferred member subsequently returns to service on or after 1 January 2007, they may come under transitional arrangements that preserve a NPA of 60. If a member returns to service before 1 January 2008, they will retain a NPA of 60 regardless of the length of the break in service. If a member returns after 1 January 2008, with more than a five year break in service, then future service will have a NPA of 65 but previous service will retain a NPA of 60. If a member returns after 1 January 2008 with a break of less than five years, then 30 days reckonable service or 60 days pensionable employment must be undertaken after a break in pensionable service. This is to enable teachers who have a subsequent break in service to return at a later date and retain a NPA of 60 in respect of their future service.
Before age retirement benefits can be paid the member must cease all teaching employment. If a member ceases teaching employment at any time after NPA they become entitled to the payment of their retirement benefits and should claim them at that time.
Back to the top3. Actuarially Reduced Benefits retirement
A member may access their retirement benefits before their normal retirement age if they are aged 55 or over and have pensionable or excluded employment on or after 30 March 2000. You must consent to the application if the member is in pensionable or excluded employment at the time the application is made. You cannot withhold consent for more than 6 months from the date on which the teacher requests permission from the employer. If a member submits an application having left teaching but returns to teaching service before the nominated payable date then the application is void.
These benefits will be actuarially reduced permanently, according to their age at retirement although the reduced pension will attract index linking. ARB cannot be awarded if the benefits are less than the guaranteed minimum pension.
There is an ARB retirement calculator on the website which you may use to obtain a basic calculation of ARB.
Back to the top4. Phased retirement
The introduction of ‘phased retirement’ arrangements will allow staff to continue working while drawing some of their accrued pension benefits. The member’s pensionable salary must reduce by at least 25% for a minimum of 12 months following the date of retirement. This could, for example, be because they have taken up a post of lesser responsibility or because you agree to a reduction in working hours.
The member may take phased retirement if they commence a new appointment in a support role such as a classroom assistant provided that the appointment is in an educational establishment. The new appointment may be with a different employer. The application form must be signed by the employer responsible for the new working arrangement.
Back to the top5. Premature retirement
You can award unreduced premature retirement benefits to scheme members aged over 50 and under normal pension age whose employment has terminated on the grounds of redundancy or organisational efficiency. Premature retirement is not an option if the person is employed on a fixed term contract. There are two types of compensation that you will be responsible for:
- mandatory compensation - you are legally obliged to pay mandatory compensation (Part IV of the Teachers (Compensation for Redundancy and Premature Retirement) Regulations 1997). The TPS will pay an actuarially reduced pension and lump sum based upon the member’s pensionable service and you pay the difference so that the scheme member receives unreduced benefits for their lifetime. Any family benefits that come into payment at a later date are paid by the TPS. You can estimate the costs of mandatory compensation payable by accessing the ARB/Retirement Calculator on the TP website.
- * discretionary compensation - you have discretionary power under Part V of the Teachers (Compensation for Redundancy and Premature Retirement) Regulations 1997 to pay discretionary compensation by way of additional pension and lump sum. You will be responsible for any family benefits in respect of these discretionary compensation payments. The decision to increase the member's benefits in this way, and by how much, is entirely at your discretion but is subject to certain limits. There are no costs to the TPS in relation to discretionary compensation payments
* This information is for guidance only as the discretionary provision does not fall within TP's remit. As such any further information or clarification should be directed to the Department for Children, Schools and Families (contact Robert Elliot telephone 01325 392 214 or email Robert.Elliot@dcsf.gsi.gov.uk)
The following information provides guidance to employers on how to obtain the costs that they would be responsible for when a Teachers' Pension scheme member of their staff is awarded Premature Retirement Benefits.
Calculating the value of Mandatory Compensation
Use the ARB / Premature Retirement Calculator to enter the appropriate details for the scheme member. In the example below the member is male, aged is 56 years and 2 months, his accrued pensionable service is 34 years 204 days and his final salary is £41,000 p.a.
Please note that for a member whose retirement date is prior to 1 October 2007 the table of reduction factors provide a factor for pension and a different factor for lump sum. However, due to a recent review of the reduction factors by the Government Actuaries Department new tables of factors have been provided which apply to ARB and Premature Retirements where the retirement date is on or after 1 October 2007. These new tables provide one reduction factor (depending upon the age of the member at retirement) which is applied to both the pension and the lump sum(s).
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Age input to calculator: |
56 years 2 months |
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Service used in calculation: |
34 years 204 days |
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Salary used in calculation: |
£41000 |
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Your Actuarially Reduced Pension: |
Basic Pension £14062 |
Converted: Residual Pen |
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Your Actuarially Reduced Lump Sum: |
Basic LS £46598 |
Converted: Maximum LS |
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Pension factor used from Table 1: |
79.4% |
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Lump Sum factor used from Table 2: |
87.7% |
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Unreduced Pension for comparison: |
Basic Pension * £17711 |
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Unreduced Lump Sum for comparison: |
Basic LS * £53134 |
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* The converted figures would be based on the TP share only, i.e. amounts shown above.
(Figures rounded down to nearest £)
The Teachers' Pension Scheme will pay the ‘reduced’ values, A (£14,062) and B (£46,598). The employer would pay an annual pension of C minus A and a one off lump sum of D minus B. In this example these would be £3,649 and £6,536 respectively.
As well as paying the mandatory values above employers can pay additional discretionary compensation, as explained above.
Payment of Mandatory and Discretionary Compensation
Employers can put in place their own arrangements for paying their elements of the lump sum and pension to the teacher. Alternatively, TP can provide a service to administer these payments on your behalf. More details about these arrangements can be viewed in Section 19: Services TP can provide to Employers.
Back to the top6. The Application Process
General Guidance
The retirement application form should be completed and returned to TP. When completing the Employers’ section of the form, you should provide details of the last two years service and salary. If the final salary rate is not known please do not leave it blank. The current salary should be entered and this should include the GTC payment. It is essential that this section is completed correctly or the teacher will be either underpaid or overpaid benefits. If benefits are overpaid they must be recovered. The member will be informed of the reason for the change in their level of benefits, i.e. that you supplied incorrect information.
Application forms should be submitted approximately 4 months in advance of the retirement date. This enables TP to conclude any issues affecting retirement and undertake processing to ensure payments are made on the correct date.
Multiple Employment
If the member is in pensionable or excluded employment with more than one employer, all pensionable/excluded employment must be terminated before retirement benefits can be paid. The exception to this is phased retirement where the member’s salary from all employments must reduce by 25% of their pre-retirement salary. If the member is still in pensionable or excluded employment with more than one employer the form must be completed by the main employer. The member is required to supply details of their other employers, along with details of their period of employment with each employer.
Date of Birth Verification
To avoid delays in the processing of the member's award you must verify the member's date of birth before submitting the application form and confirm this has been done.
Completion by the Employer
You must complete the section of the form relating to service and salary details and then forward it to TP.
If the salary used in the average salary calculation is the final year’s salary it may be restricted if the teacher’s salary in that final year was increased by more than 10% above the standard increase and you are not prepared to meet the cost of the difference in benefits. If you pay the additional contribution over and above the normal contribution, the teacher will receive retirement benefits calculated on the unrestricted salary.
For Age retirement
Where a teacher continues in employment after age 75, the application form should be submitted in time for the lump sum to be paid before the 75th birthday as lump sums cannot be paid on or after age 75 due to HMRC restrictions.
For Premature retirement
Where premature retirement is being approved it is important that you complete the declaration to confirm the reason the employment is terminating i.e. redundancy or efficient discharge of employer's function.
Enhanced Severance - No enhanced severance can be paid (under the redundancy compensation regulations) if the member is retiring on these grounds
Mandatory Compensation - You must confirm on the form that you will pay the mandatory compensation and whether you wish TP to administer it on your behalf. The application cannot be processed without this information.
The Premature Retirement Application form is available for download here:
Application for Premature Retirement Benefits (PDF)
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