Mandatory Compensation

When a member applies for premature retirement, they’ll need to make arrangements with you to pay compensation.

As part of this arrangement, the member will receive an actuarially adjusted pension (and lump sum if applicable) from the Teachers’ Pension Scheme. As their employer, you must pay the balance of what they’d have received if they were retiring at, or after, normal pension age. This is known as mandatory compensation. More information on actuarially adjusted pensions can be found on our website.

Where a member is affected by the Transitional Protection changes, the member will have a choice between final salary or career average scheme retirement benefits for remediable service. As such, the mandatory compensation figures that will be quoted will be calculated as if the member elects to retire under the career average scheme. This will be indicative of the maximum mandatory compensation that would be payable regardless of the member’s decision and is due to the career average scheme having a higher NPA and therefore more years to compensate for.

To request a career average mandatory compensation quote, please contact us at tpprc@teacherspensions.co.uk (This link opens in a new window)

Once you receive the quote, you’ll need to discuss this figure with your employee and reach agreement on if you’re willing to pay.

Any figures supplied are based on the service and salary information we hold on the member’s record at the time of issue and are subject to change if any amendment to this information is received.

Outcome 1: If you agree to pay mandatory compensation

If you agree to pay mandatory compensation, please confirm this using the ‘Transitional Protection Mandatory Compensation Confirmation’ you received with the letter advising of the compensation payment.

Once we receive your confirmation, we’ll send the member their Remediable Service Statement (RSS). This will provide them with their actuarially adjusted pension amounts and they’ll be asked to make a choice on whether to take their remedy period service as final salary or career average. Please note, their RSS won’t include any calculations for mandatory compensation.

Once the member returns their choice, we’ll then be able to process their premature retirement application and you’ll be notified of the actual compensation you’ll need to pay as part of the calculation of their benefits when these are put into payment.

Outcome 2: If you don’t agree to pay mandatory compensation

If you choose not to pay mandatory compensation, you’ll need to inform the member of this decision. They won’t be able to take premature retirement and will need to consider other retirement options. You’ll also need to confirm this decision in writing to us using the ‘Transitional Protection Mandatory Compensation Confirmation’ form you received with the letter to advise you of the compensation payments.

Discretionary Compensation

As part of premature retirement, as the employer you may choose to offer a discretionary enhancement to a member’s pension benefits. You do this by purchasing extra years that would count towards the years of service used to calculate a member’s pension benefits. Under Transitional Protection, any discretionary compensation will be based on career average scheme accrual only and won’t be included in the letter that details the mandatory compensation calculations to you, in the member’s RSS, or in the award papers issued to them.

Further information on how discretionary compensation is calculated can be found on our website.

Please be aware discretionary compensation can’t be if you’re a Higher Education institution or an employer in the Independent Sector.