Changes Affecting Employers From 1 September 2010

Paid Family Leave

The opportunity has been taken to remove a potential anomaly whereby an employer could continue to keep a person in pensionable employment by paying a nominal rate of salary during an absence on maternity, paternity, adoption and parental leave (i.e. “family leave”).

Under the 2010 Regulations, a person on family leave is not in pensionable employment unless in receipt of either:

  • statutory pay; or
  • at least half pay.

Action by employers - This change now means that from 1 September 2010, the employer will no longer record a member as being in pensionable employment where the member is receiving less than half pay, unless the member is receiving paid statutory family leave.

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Greater Clarity On Exclusions From Contributable Salary

The opportunity has also been taken in the 2010 Regulations to remove uncertainty about the pensionability of certain payments. From 1 September 2010, the following exclusions will be added to list of payments which are not contributable salary in accordance with existing practice.

  • Any payment covering the loss of any contractual holiday pay.
  • Pay-in-lieu of Notice.
  • Honoraria.
  • Payments in respect of duties outside their capacity as a teacher.

Action by employers - Employers must make sure that these payments and other non pensionable payments listed in the Regulations are not included in a member’s contributable salary in the annual return and other information sent to TP.

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Recovery Of Unpaid Contributions

The 1997 Regulations are not as clear as they could be in relation to employer responsibility for collecting arrears of contributions from employees. The 2010 Regulations are clear that the employer is responsible for remitting all contributions, including the deduction and payment of member contributions and continues to be so whilst the person is an employee.

The 2010 Regulations do give employers a power to recover unpaid contributions from the salary of employed members should this be required. This does not just apply to the financial year in which contributions were due.

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Residential Emoluments

The 1997 Regulations do not prescribe a time limit by which an employer must request that a residential emolument be treated as contributable salary. This has led to significant administrative problems and exposes the Scheme to the risk of belated requests close to a person’s retirement.

Under the 2010 Regulations, an employer must request that an emolument be pensionable:

  • Within 3 months of the start of the employment; or
  • If later, the first day on which accommodation is provided.

TP has also experienced problems with employers failing to review the value of the emolument. Therefore, the 2010 Regulations set out the reporting requirements in respect of residential emoluments and in particular a review of the rental value of the accommodation. Employers must certify that they will carry out review, which must be carried out within two years of the accommodation being accepted and biennially thereafter. If reviews are not carried out, the Secretary of State has power to void the agreement and refund contributions paid on the emolument with interest at 3%.

Action by employers - Employers who want the residential emolument to be included in the member’s contributable salary must inform TP of any request to treat the value of the accommodation as pensionable within 3 months of the member taking up employment or the first day on which the accommodation is provided, if later.

Employers must ensure that rental reviews of the accommodation are carried out every two years, as failure to do so could result in the contributions being refunded.

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Employments Pensionable On Election (within Parts 2 and 3 of Schedule 2)

The employments falling within Part 2 of Schedule 2 of the 1997 Regulations were not subject to any time limits for a person to elect for the employments to be pensionable. This made it administratively awkward to deal with elections made sometime after the commencement of employment.

The 2010 Regulations prescribe a 3 month time limit which is in line with other option periods (e.g. to opt-in or to opt-out of the TPS). This does not preclude a belated election from being backdated if there are grounds for doing so. If the backdated election is accepted, previous contributions should be paid together with interest at the standard rate.

Action by employers - Employers should already have procedures in place to notify new teachers, lecturers or youth workers where the employment is pensionable on election (with or without employer consent) of the requirement to complete an election for membership.

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Provision For Employers To Settle Valid "Preston" Claims Up To 31 August 2012 without a claim to the Employment Tribunal

It is expected that TPS employers will now have cleared the backlog of claims for backdated scheme membership in respect of pre 1 May 1995 part-time employment that was excluded from the part-time arrangements for teachers. But it is recognised that there could still be a number of potential claimants who are still in employment and would still be “in time” for bring a claim. And some employers will be faced with claims in respect of post retirement employment.

In an attempt to encourage individuals to bring their claims sooner rather than later, provision has been made in the 2010 Regulations which enables teachers to bring their claim direct to the employer and thus avoid an Employment Tribunal. This is for a limited period of 2 years. Any claim brought after 31 August 2012 must be lodged with an Employment Tribunal.

In addition, the Department wishes to put on record that in 2012 it will consider whether it is still viable to maintain the Model Settlement Agreement and the Government Actuary’s Department (GAD) calculator for calculating the employee contributions.

Action by employers and employees - Employers and employees should be aware that it will be possible to settle valid Preston claims up to 31 August 2012, without the member having to lodge an appeal through an Employment Tribunal.

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Matters Affecting Independent Or “Accepted Schools”

Independent schools registered under section 161 of the 2002 Education Act are able to apply to be accepted into the TPS. These establishments are required to provide evidence of a financial guarantee, indemnity or bond to protect the TPS.

The 2010 Regulations provide additional grounds for the removal of an independent school from the TPS. These additional reasons include:

  • Where a school has failed to keep a guarantee, indemnity or bond in place or has failed to maintain the value of the guarantee, indemnity or bond.
  • If the proprietor or school goes into administration.
  • Where the school has failed to notify TP of a change of ownership.

Action for employers - Independent schools must be aware of these additional circumstances which could lead to the removal of accepted status.

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