Teachers' pensions - retrospective additional pension
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- Опубліковано 8 жов 2024
- Teachers illegally taken out of the final salary scheme between 2015 and 2022 are being given the opportunity to purchase extra pension from that period. This video looks at how that works and compares the costs and benefits of doing it against the alternative of doing it in the current scheme.
David is NOT a financial adviser so cannot tell you if this is right for you or not.
The spreadsheet that uses the factors to work out the cost of purchasing retrospective additional pension in the NPA60 (only) final salary scheme is here: docs.google.co...
The form: www.teacherspe...
Thank you so much for providing these valuable videos. I would be enormously grateful if you could provide a follow up video later in the year / next year to let us know of any anecdotal feedback regarding the evidence (or lack of) required to authorise retrospective additional pension and whether purchases are being approved. Perhaps especially for purchases of additional pension which involve claiming over more than one year and/or larger retrospective additional pension purchases. Many thanks again :)
Brilliant ! Thank you. I wanted to do this in 2016to reduce 40% tax .
When you get your figures do check that you are getting the tax relief you expect.
Knowing the rough monthly costs would help if you wanted to spread the cost across several tax years, getting the extra 20% tax relief is likely to outweigh (don't take my word for it) the additional cost if you go into the higher cost periods.
Just received the same letter from Teachers Pension stating they are unable to process at the moment... so will wait it out until I hear from them to action additional years! But great information David as always
Thank you for this very clear video. Great teacher!
I stopped teaching in August 2013 on the final salary scheme with retirement age of 60.
I restarted teaching 5 years later in Sept 2018 on career average scheme with retirement age of 67. I'm still working and paying into this.
Hence I effectively have two separate pensions and, at 60 next birthday, will start receiving my final salary pension and lump sum
How might this Retrospective scheme apply in my situation?
A lot will depend on the exact dates you finished and re-joined...and you may need to have a "discussion" with the TPS as I have seen them apply a different interpretation to my own regarding what constitutes a "disqualifying break".
A break of MORE THAN 5 years would mean you have no transitional protection and can not apply for RAP.
If you left on 31 August 2013 and re-joined on 1 September 2018 then you have a break of EXACTLY 5 years (my interpretation) and as such I believe you should have transitional protection. An easy way to check if the TPS are applying this logic is to download the PDF version of your statement and check to see if your service up to 31 March 2022 is now being counted at Final Salary or Career Average.
Great and informative video as always. Quick question, does the extra retrospective pension also then get added to lump sum? So if you apply for 4 blocks of £250 for £1000 pension, you will also get 3 x £1000 into the lump sum?
No, additional pension adds nothing to the lump sum. Though you can "sell" some of it for 12 times the amount you sell.
Hi David. Just the same query again as I can’t find anything on tps site. I will be applying for IHR soon. I may or may not get it. I am currently in pensionable service but not paying pension as I have been sick for 18 months.
I have only just found out, like most, about the ability to buy retrospective pension blocks from your video.
I am a transition member illegally moved to CA67 from FS60 and have evidence that I consulted with Wesleyan to buy additional pension in 2016 but didn’t because it would all have gone into CA amd the deductions to take it at 60 would have been too large.
I’m now looking at the applications form and it says you can’t apply for this within a year of IHR . This seems grossly unfair as I wanted to buy additional pension as a 40% tax payer in 2016, when I wasn’t ill. By applying restrictions now it doesn’t take into account the fact that I was prevented from doing this in 2016.
Would you please investigate this for myself and other members as I feel discriminated against being ill now, because if the remedy period had t happened I would have bought this 8 years ago.
Yes, there is this line on the retrospective additional pension form that says:
"If you retire on ill-health grounds your additional pension will be paid immediately without reduction provided that you were in good health when you made your election and you became incapacitated more than one year after the date of the election."
I can understand that someone has looked at the concept of retrospective pension and applied the rules that govern how they currently are written to prevent someone taking advantage of the scheme if they know they have a much shortened life expectancy but, as you say, doing this when you have been illegally denied that opportunity up to 9 years ago doesn't sit right.
So, I have looked at the regulations:
The Teachers’ Pension Scheme(Remediable Service) Regulations 2023 and in particular at CHAPTER 4, the remedial arrangements to pay voluntary contributions to the legacy scheme.
Much of which I cannot really get my head around either!
The problem I suspect is where it makes reference to the Schedule 4 of the 2010 regulations where there are sections that appear limit if AP can be purchased during periods of ill-health...none of which though negates your central argument that you could have bought it many years ago before any such restrictions might have had any effect.
There is nothing in the remediable regulations, as far as I can see, that would otherwise bar those currently applying for IHR making an application for retrospective additional pension.
It is likely going to requires a challenge to be made against the line on the form that requires you to be "in good heath when you made your election" and take that further to the DFE who may direct the TPS to look again at how them are implementing this option for those in your position and if that doesn't get a result then to the Ombudsman.
Brilliant work yet again David. Thank you.
I’m not sure if I have received my RSS (how do I check this?).
Can I apply for this before receiving my RSS?
Will this be reduced by the same amount as the rest of my final salary (NPA 60) if I retire at 57?
Unless you have applied for retirement it is extremely unlikely you have had your RSS. Check your online account for "messages".
I did apply before getting the RSS but I have heard of some others being told to wait until they get their RSS. The TPS have a mountain to climb in terms of meeting the deadlines for issuing those so I am not surprised they are doing that.
Yes, it is reduced if you take it early.
Many thanks for the video and for sharing your insight in the comments. I am currently a deferred member and am now wanting to trigger my pension early and also apply for an additional pension retrospectively. Can you see any benefit in me doing this in a particular order? I have not yet received my RSS ?
You need to apply for the retrospective AP BEFORE you send back your option choice that is given to you when you apply for your pension.
There should be no reason to wait, though we have heard of some applications being kicked back with a message to wait until you get your RSS - there is nothing in the legislation or regulations to say that you must get your RSS first though.
Another great video! Thanks. Any idea how this works in Northern Ireland? When i called them they seemed unsure and then told me i had missed the deadline which was the in Feb 24. I didn't even know such a thing was possible until about 6 weeks ago!
Sorry, pensions is a devolved issue and as such NI will be handling this independently of how it is being done in England and Wales.
I have not seen anything published in terms of what legislation they are adopting to handle it.
David thank you for the superbly informative videos you have produced to help your fellow teachers. Acting on your advice I wanted to download the pdf of my benefits statement to check the best 3 years. When I click on benefits I cannot see the pdf option. In fact all I see are 3 boxes ( current, last year and year before). When I open these boxes they all say: My Benefit Statement. Unfortunately it’s not been possible to provide an online Benefit Statement at this time……..Due to the complexity of some benefit calculations a minority of members won’t be able to successfully view a statement.
Is there another way I can access the detailed pdf version? I am concerned that I may be disadvantaged without access to all the information that I need to make an informed decision.
Send them a message asking to be sent a copy of your statement.
Thank I have now done so
I too had this message. I phoned TPS and was told it was because I needed to provide them with my bank details to refund from the Rollback choices situation (hope that makes sense). They assured me that once the receive my bank details (another form to fill in from their website) then I will be able to see my statement online again. I hope this helps and isn’t confusing any issues.
Thanks Louise that’s kind of you to take the time. I replied to their response to my query which mentioned something to do with flexibilities. I don’t have any that I am aware of. In any case I will give them a ring and hope I have the same success as you did. Peter
Great video David, I am going to buy 2x blocks of 250. Do I download the form from TPS online?
www.teacherspensions.co.uk/-/media/documents/member/applications/miscellaneous/apb-january-2024-v18-fs.ashx
If you do get it, is it reduced if you retire early as per normal pension? I suppose that may make it less worth it!
This sounds very attractive and much better than SIPP as it has a guaranteed investment return
Quick question - how does the tax relief work ? Do you claim it for this tax year even if you are buying it retrospectively in 2015 ?
The TPS determine how much income tax relief you would have got and deduct that from the costs their calculator gives them.
In other words HMRC is bypassed and does not get involved. It was decided that trying to re-open everyone's tax affairs from the 7 years would be too burdensome on HMRC and so to simplify it each scheme would assess how much income tax relief you would get and apply it for you. To do this the scheme looks at your teaching salary and works out how much and at what level you would have paid tax on the amount they are going to charge you.
Step 1 - Work out the cost of buying additional pension (for example £20,000)
Step 2 - Work out how much of that £20,000 would get 20%, 40% or 45% income tax relief applied to it
Step 3 - Deduct the tax relief from the "bill". (If all of the £20k was to get 20% income tax relief then that bill becomes £16k)
Step 4 - Work out how much interest needs to be charged on the "bill".
Thank you for your very informative videos. I have now been told by the TPS via their messages that you can only make ONE application for retrospective additional pension. Is this true as far as you know? This is not what it says in their notes with the paper form on "How to complete the Application form" for retrospective additional pension. I have been waiting 6 months for a response to my application, sent Feb 2024 and have been told they are unable to give an exact timeframe but I will hear in due course. I would have requested to purchase a different amount of retrospective additional pension if at the time, paying monthly had been an option, as I'm still teaching and if I had known you could only make ONE application. Any advice?
They appear to have added this condition and I can understand the logic behind it. The option to apply for retrospective AP is based on the premise that you would have done it at the time but were denied the opportunity because of the illegal actions of the Government. Once a teacher has been made aware therefore they would be able to make this claim and there is no reason that they wouldn't know at this point what they "would" have applied for back at the time it was denied. However, it is also, in my opinion - so with no legal weight or qualification, likely that a teacher might have made applications over a period of years, one in 2016 then another in 2017 etc.
That they were not making it known that there was going to be a monthly payment option is certainly grounds, I suspect, to cancel the application being made if it was based on what you could have afforded via the only option offered at the time, that of making a single lump sum payment. It may require some complaining and possibly appeals to the DFE and Ombudsman but the bottom line is that you should not be disadvantaged by the illegal actions of the Government.
Thank you very much David
Great stuff. Are you allowed to buy this if you are already taking your teacher pension?
If you are one of those with transitional protection and you have not already made your choice as to which scheme the remedy period will be counted in, then, yes, you will be able to buy retrospective additional pension.
All those who were illegally denied this opportunity between April 2015 and March 2022 can apply to buy it if they would have bought it at the time.
Another great video - might have missed this but how is the tax relief obtained as current HRMC rules state you can only claim tax back for 4 years so claiming from 01/04/2015 would not lead to a claim for the 20% back from HRMC? Do TPS reduce the amount to pay by 20% (which seems unlikely)?
Yes, the TPS, and all schemes affected by the illegal blocking of access to such voluntary extra contributions, have to reduce the costs by the amount of tax relief that would have been paid at the time. The legislation was written to do it this way so as to avoid putting an extremely heavy burden on HMRC who otherwise would have to re-open the tax accounts of potentially millions of taxpayers over each of the 7 years involved. The TPS assess the tax that would have been paid by the teacher using their salary records that they already hold. As such it is possible for tax relief at the higher rates to be accounted for as well. If an individual believe the calculation should have taken account of other income then they can write back to the TPS when they get their calculations/invoice with an explanation and evidence that more relief should have been applied.
@@dfountain Thank you - have to consider what to do now then.
On 1st April 2015 I was earning £45,000. Would this have made me a 40% tax payer?
Yet another fantastic video David - thank you so much. I took a one-month break in my TP last year to retain my best inflation adjusted salary (in last 10 years) and now I'm thinking of purchasing this retrospective additional pension, which I had previously rejected on the career average terms and diverted funds elsewhere. Is there a window to take advantage of this correction? Will it still be available next year for example?
Yes. The window is based on when you get your "remediable service statement" (RSS). You have to apply for retrospective additional pension before you confirm your choices for the remedy period using that statement and within 6 months of getting the RSS.
@@dfountain Thanks David. I'm mid 50's and haven't had an RSS yet. Still teaching (adult education) and not planning to use TP until 60-62ish. TP website states "The member won’t need to make their choice on their remedy period service until they apply for retirement. They’ll receive their RSS as part of the application process." So looks like it gives me a while to apply but hoping to do so later this year. Assume it's ok to apply years before getting the RSS?
Sorry another thought... sounds like you may have to commit to which remedy service you will use before you can apply for this additional pension. If the scheme personalised calculator is to be believed (for age 62), I am drawn slightly more to CA rather than FS (nearly £2k more pension with £12K less lump sum). In which case, I may not be able to apply for retrospective FS additional pension - is that right? Sorry for the questions.
In other words, can I have FS additional pension but regular CA pension at same time? :-/
@@mmmatthew69 The legislation requires EVERYONE be sent an RSS by April 2025, so the deadline will be much sooner than when you intend to retire ;)
Thanks for this David. If the tax relief is calculated by TP and deducted from the cost, and we pay monthly, can this come from salary as a monthly payment or does it need to be made separately? If it comes from salary, I assume we won’t get tax relief on the monthly cost now? Thank you.
I suspect that they have not come up with a solution to this yet. They initially refused to accept teachers should be allowed to make monthly payments, insisting that they would only take a lump sum payment. Once it was pointed out, via a complaint or two to the DFE, that this was contrary to the legislation as well as to the natural justice that requires those illegally prevented from purchasing at the time to be given the same options they would have had access to back then, they relented. However, as far as I am aware they have not given anyone who has asked for a monthly plan any indication of how this will be processed.
Thanks 🙏🏻 in your example you buy 1 block from 2015… in theory can you buy a block for each year i.e all 8 retrospective years 2015-2022
It has been reported that the TPS are saying that you can make ONE application. The form itself doesn't allow for multiple years to be specified but as the premise for the legislation is to ensure you can get what you would have been able to get had it not been for the illegal actions of the Government this should be possible. Though I don't think this would give any advantage over asking for 8 blocks to start in 2015 and be paid for over a period of 8 years for example. There is a limit on how much you can purchase. (£6,500 in 2015/16 for example)
Thanks so much for this info David.
Yet to receive my letter from TPS. Can I still buy AP if my school moves away from the scheme before receiving the letter? Or is it possible to still apply even if I’m not an ‘active’ member?
Yes, everyone who was illegally denied the opportunity gets this no matter if they have already retired, still working or have just left teaching.
The only thing that prevents this is if you have had already taken the pension and, after getting your RSS, have made the choice of Option 1 or Option 2 for the remedy period.
@@dfountain thanks for replying David. Much appreciated
How do we get prices for paying it back monthly? I can’t seem to get any definitive answer and getting no replies from TPS. Have they even sorted the tax implications yet with that? I get you can write a letter with application, but how do we know the prices for spreading over diff amounts of years before we know which option to apply for in the letter? I feel in limbo still at mo
Yes, I made this spreadsheet just to do the lump sum calculations. The monthly ones is a little harder, and I am not sure it is even possible given the changes made to the costs if you spread the costs over the years where the contribution rates changes.
@@dfountainhow do I get them to do it though? Surely they must be able to work it out before I choose which number of years to spread over and then apply. Not getting anywhere with them though when asking for some options
Is this also true for retired Scottish teachers? I took early retirement at 58, I am 59 now and I think I meet all the criteria in your video, but until today I was totally unaware of this.
Pensions is a devolved matter and so I don't know how they are going to implement this but, in essence, the same legal principle applies. Those prevented from buying this at the time by a the illegal change must be given the opportunity to do it.
@@dfountain Thank you for sharing your knowledge and understanding of pensions, and taking the time to reply to my question.
Thanks for revealing this opportunity. Could you clarify for me how I should interpret the maximum additional pension figure? Can I just divide the figure by 250 to get the maximum number of £250 blocks that I can buy or does it relate to the maximum amount I can pay. Many thanks
You divide it by £250 to see how many blocks you are allowed to buy, £6,500 = 26 blocks.
@@dfountain Thanks😀
22:25 everyone... Thank you.
I'll have to work out if there's any scope for buying this... wanted additional pension but used the faster accrual instead during the remedial period, so already did something but that also wouldn't have been my preference. A lot to unpick
The Faster Accrual in the remedy period has to now be offered as a conversion to Additional Pension. You should have been, or shortly will be, sent a message detailing the compensation and conversion figures,
However, those figures are not directly comparable - see this video for my concerns on that: ua-cam.com/video/r2ZqnS7SpI4/v-deo.html
What about those of us in NPA65 ? Is it possible for us to buy more pension and if so how / how much?
Yes, so long as you have "transitional protection" then you were also, illegally, denied the opportunity to buy AP in the NPA65 final salary scheme.
This sheet is one I knocked together for the NPA65 AP: docs.google.com/spreadsheets/d/1jU3Tw-NaD4JXGTIHIshUzK_xHpjMpY1Jp64V3A1h5IM/edit?usp=sharing
@@dfountain I joined the scheme in August 2007 full time with no breaks in service, although I've just done one month opt out of TPS to preserve best salary (2014-1017). As I understand it I could buy 10 blocks max of AP???
If I’m about to apply for ihr in the next month or so and my contract will end and I want to do this ( as a 40% tax payer in April 2016) should I be acting very quickly? How is this affected by ihr ? I’m 56 transitionally protected member with npa 60FS and npa67 CA. I wanted to do this in 2016 and Wesleyan decided against it, but of course I would have been buying in extra CA not this FS . Any advice please David ?
Afraid I don't know. The retrospective process should put you back in the position you could have been in had you not been illegally prevented from doing so. However, there are also rules about making such applications close to a period where ill-health retirement is going to be taken. I suspect you may need to be able to justify, to a greater degree than normal, that you WOULD have made the purchase of AP back in the 2016 period.
Hi really appreciate this, just don't quite understand the limits as to how many additional block I am allowed to buy? (assuming any HMRC rules on recycling are followed) On the face of it seems a no brainer, but unsure of how to calculate how much I am allowed to purchase/max lump sum i can contribute? I qualify from 1/4/2015.
The limits change each year though they are cumulative, so you cannot buy the maximum of £6,500 from 2015/16 and then another £6,500 in 2016/17.
The list of limits is here: www.teacherspensions.co.uk/members/resources/forms/updates.aspx
@@dfountainCan we be absolutely certain the final salary maximum was £6500 in 2015-2016 and 2016-2017? The link above only gives a career average figure for this period and then quotes £6400 for the final salary scheme in 2017-2018
@@jamescovell1379 Not certain at all!
I have just found the guidance document for 2014-15 that says it was £6,200 for that year. Effectively that means £6000 as you have to purchase it in blocks of £250.
However, we are interested in the following year.
The increase is related to inflation but given that we know the limit the year before was £6,200 and then, two years later, is £6,400 in 2017/18 then the effective limit is likely to be £6,250 given the requirement for it to be in blocks of £250.
@@dfountainMany thanks David. I'd been working on it being the case that the maximum additional final salary pension I could retrospectively purchase would be £6250 relating back to this era.
Does anyone know how long it takes to get any sort of response from the Teachers pension on this? I sent a covering letter with the form attached to it at the end of July but not had any response or even an acknowledgement to say that they’ve received my application.
It probably won't be much help asking for this because there has been a massive delay (>5 months) caused by those who drew up the regulations for the TPS not getting initial clarity from HMRC regarding the tax status of various aspects. As a result, for instance, my application from December was replied to in August - which would imply a 3 month turnaround, but then I was probably one of the first to apply as I did so before they had even made a proper form to do so. It's now been about a month since they sent me the lump sum quote and I replied asking for a monthly option.
For info, I recently received a letter from TPS pricing up the £2750 of additional pension I applied for around 5 months ago. Not fully understanding the situation I arbitrarily opted for my birthday as the retrospective date but now realise an earlier date would have been preferable. I also hadn't factored in the income tax situation reducing the cost slightly. (5k) In rough figures TPS wanted 29k to buy the additional pension back in 2016 when I would have been 40. It's not an invoice as such just a set of calculations, so I'm hoping to reapply for a bigger amount on an earlier date to make best use of the funds I can access now. No extra evidence requested to justify purchase beyond a letter stating I would have bought it then. I think anyone learning that a good deal was about to end would have prioritised pension contributions at the time if we'd have known the goal posts were about to change.
The question of tax relief is an interesting one and a reason why many prefer the monthly payment option over paying with a lump sum. If you pay with a lump sum you might exceed the amount of relief that is available in the single year to which it is applied. For example, if your salary in 2016 had been £30k and they want £29k then you would get relief on less than £20k since you would have a personal allowance (0% income tax) of around £10k and pension contributions to the scheme of £2-3k.
You can ask for a monthly payment plan over a number of years, though do bear in mind that the cost increased in 2019 and again in 2024, so if you ask for a plan that extends over those periods the cost will rise.
If you're increasing your annual pension does this affect your FS lump sum?
Additional pension does not impact the automatic lump sum but you can "sell" some of it when you retire for the optional lump sum in the same 12-to-1 ratio.
@@dfountain 1 to 8, 1 to 12 out. Interesting 😄
@@ctfm938 You can only "sell" 25% though.
When applying for retrospective additional pension, how do I know the exact date when I was moved to the Career average scheme so my application is not rejected and I can maximise the benefits? Is it based on my date of birth? Buying it with a lump sum appears to be the best value?
The transition dates are here: www.teacherspensions.co.uk/employers/advising-members/eligibility/~/media/93CC7173567A46B2A3D99E4D242FCEE9.ashx
Though the date you choose has to be one where you would have made this commitment at the time rather than trying to find the one that is the best value now of course.
@@dfountain Many thanks, Your speed of response and knowledge is impressive! I will choose a date soon after my transition date when I luckily received a lump sum from family!
Hi David
Is the normal response from the TP ?
Dear Mr Knapper I refer to your application to purchase retrospective Additional Pension in the Final Salary scheme. We are currently unable to progress your request. We are restricted by the Department of Education legislation and when we have received the information that we require to process your application, from the Department of Education, we will be in contact with you accordingly. Thank you for your patience. Yours sincerely Tony Chard Pensions Administrator
It is a common response. They appear to be putting off people applying whilst they try to get up to speed with producing the RSS's (remediable service statements) for everyone as they must get that done before April and there have been delays in getting instructions from the Treasury about the tax status of refunds/compensation and interest.
I applied for some additional pension recently and got the message... "We are currently unable to progress your request. We are restricted by the Department of Education legislation and when we have received the information that we require to process your application, from the Department of Education, we will be in contact with you accordingly."