Teachers' Pensions

Some questions keep being raised. So we've compiled a list of the most frequently asked ones - along with their answers.

Popular Questions

Q Who is potentially affected by the reduction in the Lifetime Allowance?

A

If the value of your accrued benefits in the Teachers' Pension Scheme and other arrangements exceeds £1 million, you may be subject to an Lifetime Allowance (LTA) charge. Members with a current LTA value of benefits equal to approximately 80% of the LTA of £1 million are particularly at risk of incurring an LTA charge, to which they would not previously have been subject.


A member who takes retirement benefits on or after 6 April 2016 will have their pension benefits assessed under the reduced LTA, unless they hold a valid transitional protection certificate from HM Revenue and Customs (HMRC).


If you intend to take benefits on or after 6 April 2016, it may be possible to protect your benefits from the LTA charge by applying for Individual Protection from HMRC, subject to certain conditions.

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Q What is the Lifetime Allowance?

A

The Lifetime Allowance (LTA) came into effect on 6 April 2006. The LTA is the total value of any pension savings that you can have at retirement without incurring a tax charge. The total amount that you need to consider includes your pension savings from all your pension schemes, but excludes your state pension.

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Q Who's responsible for notifying HMRC of a liability and Annual Allowance charge?

A

You're responsible for reporting any excess over the Annual Allowance (after utilising any carry forward) via a self assessment tax return. The amount of Annual Allowance charge will be included in the tax calculation and you would normally have to pay this tax charge by the usual self assessment payment deadlines.

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Q Under what circumstances are my benefits likely to exceed the Annual Allowance?

A

There are a number of scenarios where a person could exceed the Annual Allowance (AA). These include:



  • Members who have a large increase in salary during the Pension Input Period (PIP), especially if they already have significant service accrued.

  • Members who leave service in the Teachers' Pension Scheme and later return to pensionable employment on a higher salary, as any periods of service are automatically linked together, which will affect the growth in their benefits during that PIP.

  • Members purchasing a large amount of Additional Pension by way of a single contribution.

  • Members looking to pay the outstanding balance of Past Added Years could breach the AA, if they exercise this option on leaving employment or at retirement.

  • Members using their redundancy funds to increase pension benefits could be affected. This includes any members who have sacrificed part of any redundancy payment to allow their employer to purchase Additional Pension on their behalf.

  • Members with high earnings who may be subject to the tapered AA.


For further information please see the 'Pension and tax' section of our website.

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Q If I purchase Additional Pension will that cover my dependants too?

A

Faster Accrual is included as part of your main scheme benefits and will count towards dependents' pensions. Buy Out does not directly affect the value of any dependents' pension, but can result in higher main scheme pension and hence result in higher dependents' pensions. With Additional Pension you must specifically purchase dependants' benefits as well as personal benefits. If you didn't, the Additional Pension won't be paid after your death as part of a dependents' pension, but only to the dependents pension paid to a spouse, civil partners and nominated partners, not to a child.

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