Employers' Guide
Section 13 - Pension Contributions
Contents
1. Contribution rate 2. Deduction of contributions 3. Refund of contributions deducted in error 4. Residential emoluments 5. Remittance of contributions to TP 6. Documentation relating to payment of contributionsThe purpose of this section is to instruct employers on the rate of contributions, how contributions are made and how to submit contributions.
1. Contribution rate
TPS contributions are payable by teachers, who are members of the TPS, and their employers. Contribution rates are 6.4% of salary for teachers and 14.1% of salary for employers. The rates are regularly reviewed by the Government Actuary.
Back to the top2. Deduction of contributions
Pension scheme contributions must be deducted from the gross salaries of all teachers who are members of the scheme. The responsibility for making correct deductions from a teacher's salary rests with you. Failure to do so mean you will need to recover the arrears due from the teacher.
The total of employer and employee contributions must be remitted to TP by 7th of the month following deduction. Where the 7 th is over a weekend or bank holiday the contributions must be received by the last working day preceding either the weekend or bank holiday. In the event of late payment, interest will be charged at the rate of 8% per annum calculated with daily rests. Employers will be liable to pay arrears and interest for periods where incorrect deductions or payments of contributions are made to the TPS.
In addition to the basic contributions, some teachers have elected to pay additional contributions, over and above their basic contributions. Details of these elections are outlined below. The teacher should be able to produce a relevant letter issued by TP, and the information must be checked. If there is any discrepancy TP must be informed.
Additional pension contributions
This is where a member has decided to purchase additional pension by instalments that are deducted from their salary. The instalment period must be completed before NPA. These contributions must be noted separately from other contributions on the remittance slip.
As instalment costs will be reviewed at each Scheme valuation the deductions may increase or decrease depending upon the results of the valuation. TP will notify the teacher and you in advance of any changes that are to be made to deductions
PAY
Additional contributions in respect of these arrangements are no longer available but existing arrangements are being honoured. Where a teacher is buying additional years of service by instalments additional contributions must not be deducted from the salary if there has been a break in pensionable employment of more than 30 days.
Care should also be taken that contributions are not deducted beyond the end date of the election. The teacher should be able to provide the date the arrangement ends but in cases of doubt, TP must be consulted.
Contributions on a former higher salary
This provision is no longer available but existing arrangements are being honoured. Contributions in respect of these elections are classed as additional contributions and should be deducted from the teacher's salary and submitted with the monthly remittance of all other contributions to TP. The contributions should be recorded with other extra contributions.
Additional contributions for family benefits
If the teacher wishes to increase the value of their dependant’s pension they may make payments by instalments that are deducted from their salary. Contributions in respect of these elections are classed as additional contributions and should be deducted from the teacher's salary and submitted with the monthly remittance of all other contributions to TP
Additional Voluntary Contributions (AVCs) with Prudential
A teacher can also pay additional contributions into the Scheme's AVC provision with Prudential either as a percentage of salary, or at a set monthly amount. These contributions should be remitted directly to Prudential Financial Services.
Instruction for deduction from salary and remittance of contributions to Prudential can be found in the Prudential AVC Facility Employers Manual, a copy of which can be obtained from
Prudential Financial Services
Teachers AVC
Craigforth
Stirling
FK9 4UE
Telephone: 0845 6000 343.
Back to the top3. Refund of contributions deducted in error
If you become aware that TPS contributions deducted in error from current financial year salaries, you should make the necessary refund including income tax and National Insurance adjustments via the payroll. This is not a repayment of contributions which is undertaken TP subject to certain conditions after a member has left pensionable teaching.
However, if you become aware that TPS contributions have been deducted in error from previous financial years you should make the necessary refund to the teacher. HMRC have confirmed that, in such circumstances, there is no obligation on you to deduct income tax from the refund. The refund will be treated as taxable income received by the teacher in the tax year of payment. It is the teacher's responsibility to report this on their tax return.
However, if you do deduct tax, it should be deducted at the basic rate and again the teacher should report this on their tax return.
HMRC have confirmed that, if NI contributions have been deducted erroneously in tax years prior to the current year, you should write to your local HMRC office to inform them of underpayments or overpayments of NI contributions.
Back to the top4. Residential emoluments
The Teachers' Pensions Regulations allow the value of free accommodation to be included in contributable salary where you have agreed this with TP. This arrangement is known as a 'residential emolument'.
The valuation used consists of current gross annual value of the residence, as certified by an estate agent, i.e. the rent the property would fetch if let on the open market, subject to a limitation of one-sixth of contributable salary. In addition to this valuation, the annual Council Tax and costs of amenities (e.g. heating, lighting and water) may be added if these are provided free of charge. TP will consider the incorporation of a residential emolument upon written receipt of the above information.
Where a residential emolument is accepted as part of contributable salary, pension contributions are payable on it, by both the scheme member and you from the date of occupancy of the property and it continues to form part of contributable salary so long as it is received by that teacher, and any successor. Interest at the appropriate rate will be added to any backdating and the emolument will be further reviewed every 2 years.
Back to the top5. Payment of contributions to TP
The Teachers' Pensions Regulations require employers to remit the contributions deducted from the teachers' salaries and their employers' contributions to TP within 7 days after the end of the month to which the contributions relate. Where the 7 th of the month is over a weekend or bank holiday the contributions must be received by the last working day preceding either the weekend or bank holiday.
If all contributions due are not received within 7 days of the last day of the month to which they relate, compound interest will be calculated at the rate of 8% per annum, or 12% per annum in relation to pensionable employment before 1 April 2003, compounded with monthly rests, for each day's delay.
Back to the top6. Documentation relating to payment of contributions
It is important that the correct paying-in slips is completed each month providing an accurate statement of the contributions that are being paid together with the contributory salary bill on which the contributions are based.
It is essential that the teachers’ and employer contributions collected equate to 6.4% and 14.1% of the total actual contributory salary. If not, you need to provide an explanation at the bottom of the slip giving the reasons for the variance. TP monitor monthly payments and failure to pay over the correct rates or provide a reasonable explanation for any variance will result in a report to the DfE who will determine appropriate follow up action.
Remittances must be made to TP on or before the 7th day of the month following the month the contributions relate to. Where the 7 th of the month is over a weekend or bank holiday the contributions must be received by the last working day preceding either the weekend or bank holiday. This can be done by electronic transfer, cheque or at the counter of a bank. Electronic transfer guarantees payments are received.
The paying-in slips, showing the breakdown of payment, must be completed and despatched to TP to arrive no later than the actual payment. The paying-in slips must be completed regardless of the method used to submit payments.
3 bank working days must be allowed for all payments made over the counter of a bank and the payment must be accompanied by the appropriate paying-in slip.
Where payment is made by cheque, this should be made payable to "Teachers' Pensions" and crossed "Account Payee" then sent, together with a completed paying-in slip. Payments by cheque must be posted in good time to reach TP by the due date. To ensure that interest penalties are not incurred allowance should be made for possible postal delays, weekends and public holidays.
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