Adding to your pension with Flexibilities

Want to add more to your pension? Here are the answers to some frequently asked questions about the process to help you along.

  • Answer:

    Additional Pension gives members in either the Final Salary or Career Average arrangement  the option to make additional contributions to buy extra annual pension in addition to their main scheme benefits. You can choose whether the additional pension will be included in your pension benefits only, or will also be included in the family benefits payable to your dependents’ in the event of your death. More details can be found on our Additional Pension factsheet.

  • Answer:

    When members take their pension before the Normal Pension Age for the payment of their benefits, pension schemes reduce the amount of the pension to take into account that it will be paid out for a longer period of time.  This is known as actuarial reduction. In its career average arrangement the Teachers' Pension Scheme offers a standard rate of actuarial reduction, between the ages of 65 to 68, of 3%. However, you can choose to Buy Out this standard rate and retire at age 65 without any reduction if you're retiring early. The Buy Out is purchased through regular monthly contributions throughout your career. You only have one opportunity to ‘Buy Out’ the reduction and this must be done within six months of you first entering the career average arrangement. More details can be found in our Buy Out Factsheet.

  • Answer:

    Faster Accrual gives Career Average members the opportunity to pay higher contributions to increase your pension for a particular scheme year (1 April to 31 March). More details can be found in our Faster Accrual factsheet.

  • Answer:

    You can buy Additional Pension in multiples of £250 pa, subject to the maximum amount of extra pension permitted in each arrangement of the Teachers’ Pension Scheme (see here for details of the maximum). . The cost depends on various aspects such as your age, how much Additional Pension you want to receive and the way in which you purchase it. The factors used to calculate the cost of Additional Pension can be found here.

  • Answer:

    Buy Out is a long term commitment and you’ll pay contributions from the point you make the election up to when you retire. Contributions are based on factors such as your age and the period you wish to Buy Out. The factors used to calculate the cost of Buy Out can be found here.

  • Answer:

    There are three rates you can choose to pay instead of the standard accrual rate of 1/57th of your pensionable earnings. The rates are 1/45th, 1/50th or 1/55th. The increased contributions that you’ll have to pay are based on a number of factors such as your age and the rate you are purchasing. The factors used to calculate the cost of Faster Accrual can be found here.

  • Answer:

    You can apply for any of the flexibilities via My Pension Online or by completing a paper application form here.

  • Answer:

    Yes, but there’s an overall limit on the amount of Additional Pension that can be purchased either by you or your employer and this is reviewed each financial year. If the salary used to calculate your benefits at retirement is reduced because of the restricted salary provision, your employer also has the option (with your consent) of purchasing an amount of Additional Pension – provided the application is made within 6 months of leaving pensionable employment.

  • Answer:

    The way Additional Pension is applied to a dependent’s pension is different to the other flexibilities available through the Scheme. For example Faster Accrual is included as part of your main Scheme benefits and will therefore automatically count towards dependents’ pensions. The same can be said of the Buy Out option in that it can result in higher main Scheme pension and as such result automatically in higher dependents’ pensions.

    Additional Pension works differently because it does not increase your main Scheme benefits, but provides a separate additional pot of pension held in an additional pension 'account’ alongside your main Scheme benefits. This means that because your main Scheme benefits would not directly increase, neither would any dependant’s pension. If you want to provide an increased additional dependant’s pension, you must specifically purchase additional dependants’ benefits as well as additional personal benefits by stating that your election is for both when making it. If you didn’t, the Additional Pension won’t be paid after your death as part of a dependents’ pension.

  • Answer:

    If you draw your benefits before NPA, your Additional Pension will be actuarially reduced as it will be paid out for a longer period of time. If you take Phased Retirement, you can choose to whether to take your Additional Pension benefits at first, second or third Phased Retirement or wait until your final retirement.

  • Answer:

    If you are granted Ill-health retirement within one year of commencing payments, your Additional Pension contributions will be refunded. However, if you’re granted Ill-health retirement more than a year after commencing payment, you will receive an unreduced Additional Pension. Faster Accrual is included as part of the Career Average benefits, while Buy Out isn’t applicable when taking Ill-health retirement as benefits are not actuarially reduced (but note that any contributions for Buy Out are not refunded).

  • Answer:

    If the growth in your benefits exceeds the Annual Allowance, you may be subject to an Annual Allowance charge.

    For further details on pensions and taxation see our guides here.

    Given the potential tax consequences, you should seek advice from an Independent Financial Advisor if you’re planning to make a lump sum payment to purchase Additional Pension.

    Further information can be found in our planning for retirement guide and you can assess the impact of this allowance on your own pension by using HMRCs annual allowance calculator available here (This link opens in a new window)

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