Contributions
Contents
What do I pay? How do I pay? Can I pay additional contributions? Purchasing additional pension Changes Affecting Additional Pension From September 2010 AVCs through the Prudential Stakeholder, personal pensions and free-standing AVC's Can I increase the pension my dependants will receive? Can I restore service if I had my contributions returned?What do I pay?
As a member of the TPS you will pay 6.4% of your salary towards a package of benefits. Your employer pays a further 14.1% . This makes a total of 20.5%. You will receive income tax relief on your contributions. The Government Actuary reviews these rates at regular intervals.
Back to the topHow do I pay?
Your employer will deduct contributions from your monthly salary. Your employer will pay all contributions direct to TP each month, it is important that you make sure that the correct amounts have been taken. If you think an error has been made, contact your employer immediately.
Back to the topCan I pay additional contributions?
There are other ways in which you can increase your retirement benefits by paying extra contributions. These include:
- purchasing additional pension;
- paying Additional Voluntary Contributions (AVCs) through the Prudential;
- paying Free-Standing Additional Voluntary Contributions (FSAVCs);
- paying into a stakeholder pension or a personal pension.
In certain circumstances, you can also choose to pay extra contributions to increase the amount of survivor benefits your dependants may receive.
You can get income tax relief on your additional contributions. If you make a lump sum payment you should contact HMRC for information on tax relief.
Back to the topPurchasing additional pension
You can purchase additional pension that is paid separately from your TPS benefits. When you retire your eventual retirement benefits will attract ‘Pensions Increase’, which means they are index-linked. The additional pension you purchase will attract Pensions Increase in the same way as your TPS benefits.
The cost of purchasing additional pension depends on your age and the amount of additional pension you wish to receive. You cannot purchase additional pension after NPA. The maximum payment period is 20 years and must be completed before NPA.
There are two ways you can pay for additional pension:
- by having deductions from your salary; or
- by paying a one off lump sum.
You will find full details in the fact sheet Additional Pension and a calculator to estimate the cost.
Back to the topChanges Affecting Additional Pension From September 2010
"Start Date" For Additional Pension By Monthly Payment
The 2010 Regulations clarify the “start date” for monthly Additional Pension which is defined (for monthly payment elections), as the first day of the second month after the month in which the member is notified that the election is accepted. The first payment must be made by the last day of the second month after the month in which the member is notified that the election is accepted.
Payment Of Single Contributions To Additional Pension
The 2010 Regulations provide an easement for the payment of a single contribution to purchase Additional Pension at retirement.
The election will still need to be made whilst the person is in pensionable employment, but this easement will allow one month for payment to be made if an election is made shortly before retirement, even if the member has passed Normal Pension Age.
Where an employer chooses to purchase Additional Pension in order to top up a pension that has been calculated using a restricted average salary, the 2010 Regulations allow for payment to be made up to 6 months of the person’s cessation of employment.
Additional Pension – Paid Up Credits
The period required by a leaver to pay the actuarial value of unpaid monthly contributions as a lump sum to complete the full election, is to be extended from within 1 month to within 2 months of ceasing to be in pensionable employment. Otherwise, a paid up credit applies.
The 2010 Regulations introduce protection for a person who, having previously made an Additional Pension election (whilst in good health), subsequently falls ill and applies for Ill-health retirement benefits. If the person has a period of unpaid sickness absence whilst the application is being processed, the Additional Pension election does not automatically cease during the period of unpaid sickness absence.
Additional Pension – Reserved Forces
From 1 September 2010, a person in the Reserved Forces who is called up during a payment period and who elects to pay contributions direct to the Scheme is deemed to remain in pensionable employment. Consequently, an automatic ‘paid up credit’ is not triggered, where a member opts to continue with the Additional Pension, even though technically the member has left pensionable employment.
Action for members and employers - Members and employers to note these changes in the Additional Pension Regulations.
AVCs through the Prudential
The TPS has a special arrangement with the Prudential. The Prudential invests your AVCs and the profits (on which you do not pay income tax or capital gains tax) are added to your account.
The Prudential cannot guarantee your profits in advance, but each year they will send you a benefits statement so that you can see how your investments are performing. You can pay AVCs to increase your own pension, a dependant’s pension, the lump-sum death grant - or any combination of these three.
You can contact the Prudential direct for more detailed information at:
Prudential Life and Pensions
Teachers’ AVCs
Craigforth
Stirling
FK9 4UE
or visit their web site,
http://www.pru.co.uk/teachers/
There are a number of other insurance companies that offer a FSAVC scheme. You can choose to pay your AVCs into a personal policy with any company of your choice. You can get more details direct from companies offering this kind of arrangement.
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Stakeholder, personal pensions and Freestanding AVCs
Members of the TPS can contribute to a stakeholder pension, personal pension or Freestanding AVC scheme. If you wish to take out an individual pension you need to make your own arrangements.
We cannot advise you about which type of extra contribution to choose. You can get advice from an independent financial adviser or from your teachers’ association.
Back to the topCan I increase the pension my dependants will receive?
If you are a married man all your service from 1 April 1972 will automatically count for survivor benefits. You can purchase service before April 1972 so that this also counts for survivor benefits if you marry for the first time before you retire.
If you are a married woman all your service from 6 April 1988 automatically counts for survivor benefits. You can purchase service before April 1988 within six months of getting married or if you married whilst out of service within 6 months of returning to service. You should contact us immediately if this applies to you.
If you have registered a Civil Partnership all your service from 6 April 1988 automatically counts for survivor benefits. If you are in a civil partnership and are in service, you can purchase previous service for survivor benefits if you apply to TP within six months of registering your civil partnership. If you were not in service when you registered, you may do so by applying within six months of returning to service.
If you are living with a partner you can nominate your partner to receive survivor benefits after your death. Service from 1 January 2007 will automatically counts for survivor benefits. You can purchase service before that date within six months of nominating your partner. There will be a check undertaken after your death to ensure the conditions of nomination are still satisfied. If your partnership ends you must inform us.
If you are a single teacher you can nominate a close relative who is financially dependent on you to receive benefits when you die, provided that financial dependency still applies at the time of your death. When you make the nomination, you can also choose to pay extra contributions for a higher pension. The person you nominate will not be entitled to benefits if you marry.
Back to the topCan I restore service if I had my contributions returned?
If you are in pensionable employment you can repay to the TPS any contributions you withdrew before 1 June 1973. You will have to pay compound interest on the contributions at the rate of 3.5% for each year since the refund was made. This service will then be reinstated into the TPS and will count in the normal way when we calculate your retirement pension and lump sum.
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