Teachers' Pensions

Tiered Contributions

Our Frequently Asked Questions below will help you answer many of your common questions about Tiered Contributions.
  • How should I determine which band an employee should be in?

    Their annualised pensionable earnings in the pay period should be used to determine the contribution band a member falls into. From April 2015 the contribution bands will be based on actual pensionable earnings, not full-time equivalent.

  • How should I work out the contributions a member should pay?

    Contributions are based on actual pensionable earnings paid in the pay period.  If a teacher is paid £3,000 in a monthly pay period, their annual salary rate will be £36,000, which is in the 9.6% contribution tier.

    Monthly Contribution £3,000 x 9.6% = £288.00

  • Has the method of calculating the full-time equivalent (FTE) changed?

    No, the method of calculating the FTE has not changed.

  • How should I calculate the contributions if an employee has a backdated pay increase?

    Back-dated pay increases are treated as pensionable earnings in the month they’re paid, but are not included when deriving the annual rate of salary when determining the contribution tier. The contribution rate is applied against all pensionable earnings – salary and any back-dated pay increase.

    Example

    Jesse, who has an annual salary of £41,500, receives a pay rise in September 2015 equal to £2,400. The pay increase of £2,400 is equal to £200 per month. Due to administrative restrictions the pay increase is not received by Jesse until his November 2015 pay.

    In November Jesse receives his new monthly salary and the backdated pay increase i.e. £3,658.33 + £400 (new monthly salary plus 2 months back dated pay award). To calculate Jesse’s contributions for November you need to annualise his total pensionable earnings, excluding back-dated pay in that month

    £3,658.33 by 12 = £43,900.

    Jesse is in the 10.2% contribution band. For November’s pensionable earnings Jesse’s contribution will be 10.2% of £3,658.33 + £400, i.e. £413.95.

  • How should I calculate the contributions if an employee has a salary increase?

    If a member has a salary increase from the start of the pay period then there is no change to the method of annualising the amount paid in the pay period. 

  • How should I determine which band an employee should be in when they only work odd days?

    This should be determined in the same way as a member who is starting or leaving mid-month.

  • How should I determine which band applies to a supply teacher who submits a back-dated pay claim?

    Saul is a supply teacher who submits his pay claims late; claiming in the same pay period for hours worked in October, November and December 2015.

    Saul receives £2,000 for each month, a total of £6,000 paid in the pay period.  Saul’s annual rate of salary for the pay period will be:

    £6,000 x 12 = £72,000

    Saul will be in the 11.3% contribution band and his contributions will be 9.6% of £6,000, i.e. £678.

    In this scenario employers can, if they choose to, calculate the annual rate of salary and hence contributions on a monthly basis; i.e. three separate calculations for the three months:

    £2,000 x 12 = £24,000

    Saul would be in the 7.4% contribution band and his contributions will be 7.4% of £2,000 for each of the three months.

  • If my employee is not happy about the contribution band I have used can they appeal about that?

    If an employee is unhappy about the contribution band that you’ve allocated them to they should discuss this with you and if they remain unhappy with your explanation, they should follow your internal disputes procedure.

  • How should I report supply and hourly paid teachers?

    Where supply teachers are paid in April for work completed in March, the contribution tiers to use are those in place when the employee is paid.

  • What happens if I make a one off payment to a member of staff for one month, for example if they’ve undertaken a temporary promotion in the month?

    Any salary earned within a calendar month will determine the contribution rate to be applied for that month. You need to derive the annual salary rate to determine the contribution tier and apply the rate to the pensionable earnings in the pay period.

    Example

    Claudette receives a one off payment for acting as Head of Department in June while the Head was ill; her annual salary rate is normally £38,500, which includes a London allowance.

     

    She pays contributions at a rate of 9.6% each month which amount to £308.00. In June, as a result of her temporary promotion she earned £3,458.33, making her annual salary rate £41,500.  Contributions will therefore be deducted at a rate of 10.2% amounting to £352.75, an increase of £44.75.

     

    The Head returned in July so Claudette’s annual salary rate has reverted to £38,500 so she will pay contributions at a rate of 9.6%, which totals £308.00

  • What happens where a teacher has two or more part-time regular contracts?

    You need to derive the pay period annual salary rate for each employment, do not add the salaries together and average them. You should determine the appropriate contribution band to each contract and apply it to the respective pensionable earnings in the pay period.

    Example

    Marie works 70% at Green School on an annual full-time equivalent salary of £20,000 and also works 10% at Black School where she has an annual full-time equivalent salary of £26,000.

    She pays contributions on her employment at Green School at a rate of:

    £20,000 x 0.7 = £14,000 = 7.4%

    Her monthly salary at Green School is £1,166.66 and her monthly contributions are £86.33.

    She pays contributions on her employment at Black School at a rate of:

    £26,000 x 0.1 = £2,600 = 7.4%

    Her monthly salary at Black School is £216.67 and her monthly contribution when she works at this school are £16.03.

    This same scenario applies if Marie has two separate contracts at the same school.

  • What should I do if an employee is on reduced pay due to family leave or sickness absence?

    In these circumstances you would derive the annual salary rate based on the employees usual earnings before the period reduced pay – as long as the leave is still pensionable service. Contributions are then deducted at that rate, but against actual earnings paid in the pay period.

    Example

    Skyler is a classroom teacher and works full-time with an annual salary of £27,000. Skyler is on a period of maternity leave, receiving half pay (£1,125 rather than her usual £2,250). Skyler’s contribution rate will be determined using her usual pay, but the rate will be applied to her actual pensionable earnings in the period.

    To work out Skyler’s monthly contribution you need to annualise her usual pensionable earnings:

    £2,250 x 12 = £27,000

    Skyler will be in the 8.6% contribution band and her contributions whilst receiving half pay will be 8.6% of £1,125, i.e. £96.75.

    This applies to all family leave that is in pensionable service: at least half pay or statutory pay.

    Please note that for sick leave, if the employee is receiving less than half pay, the leave is not pensionable service and contributions must not be deducted.

  • What should I do if an employee receives a mid-month pay increase?

    If the member has a mid-month salary increase, the contribution tier is still determined by what the member is paid in the pay period, as set out in the following example:

    Example

    Hank is a classroom teacher who works full-time and earns £38,500 per year. On 15 September 2015 Hank receives a pay increase to £41,500. To work out Hank’s monthly contribution for September you need to calculate the monthly pay Hank will earn in September:

    15 days at £38,500 = £1,604.167 and 15 days at £41,500 = £1,729.167

    Total £3,333.33.

    This produces an annual salary rate of £3,333.33 x 12 = £40,000. This means that Hank will pay a pension contribution for September equal to 9.6% of £3,333.33 i.e. £320.00

    In October Hank will earn £3,458.33, which will give an annual salary rate of:

    £3,458.33 x 12 = £41,500.

    This means that Hank will pay a pension contribution equal to 10.2% of £3,458.33 i.e. £352.75.

  • What should I do if an employee takes unpaid leave or goes on strike?

    Derive the annual salary rate based on the employee’s actual earnings in the pay period.

    Example

    Gus has an annual full-time equivalent salary of £45,000 and he takes 15 days unpaid personal leave. Contributions are usually paid at a rate of 10.2%.

    In the month where he takes the unpaid leave his salary will be reduced to take into account his absence and his contribution rate will reduce accordingly, in this instance to 7.4%.

  • What should I do if an employee takes up or leaves an appointment mid-month?

    If the member leaves mid-month then base the contribution tier on their earnings in that month.

    Example

    Walt leaves service in the middle of the month and it's agreed he will be paid half his salary for that month. His usual salary is equivalent to £30,000 per year, but in the month he leaves his annual salary rate will be £15,000, which means contributions should be deducted at a rate of 7.4%. This month he’ll receive £1,250 and his contributions will be £92.50 instead of £185.00 (which he paid in the previous month).

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