Managing contributions

Deduction of contributions

All teachers who are members of the scheme must have their pension contributions deducted from their gross contributable salaries. The person responsible for deducting the correct amount is you. If you don’t do it properly, you’ll then need to recover any arrears due from the teacher.

Here are some basic things to remember:

1 All employer and employee contributions must be remitted to the Teachers’ Pension Scheme by the seventh of the month following their deduction.

2 Where the seventh falls on either a weekend or bank holiday, the contributions must be received by the last working day before it.

3 Interest will be charged on late payments. What’s more, where incorrect deductions or payments of contributions are made, employers will be liable to pay arrears and interest.

4 Where a teacher has elected to pay additional contributions over and above their basic

contributions, they should produce a letter from the Teachers’ Pension Scheme that explains the rate of deduction and the period over which it applies.

5 Finally, you must complete a payment slip on the Employer Portal giving the breakdown of the contributions you are paying.

Additional pension contributions

If a member wants to increase their pension benefits, they can buy additional pension as long as they are in pensionable employment and under 65.

Additional pension can be bought in multiples of

£250 up to a maximum of £5,900. This amount is reviewed each year and you and the teacher will be notified of any changes. Payment can be made by a lump sum or a regular monthly payment deducted from a member’s salary. Monthly deductions should be recorded in Line I of the contributions monthly slip.

Section 3: Scheme administration Employer guide 36

3.2 Managing contributions. (Continued)

Past Added Years (PAY)

The PAY arrangements are no longer available but existing arrangements are being honoured. These contributions must be noted separately from other contributions on the remittance slip in line G.

Where a teacher is buying additional years of service by instalments (set % deduction of salary) additional contributions must not be deducted from the salary if there has been a break in pensionable employment of more than 30 days. Employers should also notify us when a teacher has had a gap of more than 30 days so that the record can be updated accordingly.

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, the Teachers’ Pension Scheme 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’ (not Additional Pension) and should be deducted from the teacher’s notional salary and submitted with the monthly remittance of all other contributions to the Teachers’ Pension Scheme.

The contributions should be recorded with other extra contributions in line G of the remittance slip.

Additional contributions for family benefits If the teacher wants 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’ (not Additional Pension) and should be deducted from the teacher’s salary and submitted with the monthly remittance of all other contributions to the Teachers’ Pension Scheme.

Additional Voluntary Contributions (AVCs) with Prudential

A teacher can also pay additional contributions into the Scheme’s AVC provision with Prudential. This can be either as a percentage of salary, or at a set monthly amount. These contributions should be remitted directly to Prudential Financial Services.

For more information visit www.pru.co.uk/teachers/

or call 0845 070 0007.

Refund of contributions deducted in error

If you become aware that contributions have been deducted in error from current financial year salaries – or a member has opted out of service within three months of taking up employment – you should make the necessary refund including income tax and National Insurance adjustments via the payroll.

Remember, this is not a repayment of contributions which is undertaken by the Teachers’ Pension

Scheme subject to certain conditions after a member has left pensionable teaching.

If you become aware that the Teachers’ Pension Scheme 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.

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 you should write to your local HMRC office to inform them of underpayments or overpayments in tax years prior to the current year. This is to ensure the correct NI rate is applied to NI contributions.

You should take a credit for the refund from your monthly payment to Teachers’ Pensions and show the refund on the monthly payment slip. This adjustment must be shown on the annual audit return.

3.2 Managing contributions. (Continued)

Residential emoluments

The Teachers’ Pensions Regulations allow the value of free accommodation to be included in contributable salary where you have agreed this with the Teachers’ Pension Scheme. This arrangement is known as a ’residential emolument’.

Here are some things to remember about residential emoluments:

1 They're not automatically carried over from one post holder to the replacement.

2 You have three months from the start of the employment (or from when the accommodation becomes available) to agree the emolument with Teachers’ Pensions. However, they will need written evidence of the valuation calculations before they accept residual emolument as part of a teacher’s contributable salary.

3 The emolument should be reviewed every two years or the agreement may be rescinded and the contributions refunded.

4 The valuation used consists of current gross annual value of the residence, as certified by an estate agent, i.e. the rental value of the property if let on the open market, subject to a limitation of one- sixth of contributable salary. In order to do this you will need to provide a current gross rental valuation of the property as certified by an Estate Agent. This will be subject to a limitation of 1/6th of contributable salary. The gross annual salary rate should also be provided.

5 As well as this, the annual Council Tax and costs of amenities (like heating, lighting and water) may be added to the calculation if these are provided free of charge.

6 Where a residential emolument is accepted by Teachers’ Pensions, pension contributions are payable on it, by both the scheme member and you from the date of occupancy of the property.

This continues as long as the teacher remains in the property.

Payment of contributions to the Teachers’

Pension Scheme

The Teachers’ Pensions Regulations require employers to remit the contributions deducted from teachers’

salaries and their employers’ contributions to the Teachers’ Pension Scheme within seven days after the end of the month to which the contributions relate.

Where the seventh of the month falls on a weekend or bank holiday, the contributions must be received by the last working day before the seventh.

Contributions should be paid by electronic transfer, cheque or at the counter of a bank – with electronic transfer the best guarantee that payment will be received. At least three bank working days must be allowed for all payments made at the counter of a bank.

If all contributions due are not received within seven days of the last day of the month to which they relate, compound interest will be calculated for each day’s delay.

Documentation for payment of contributions We monitor monthly payments and failure to pay at the correct rates or provide an acceptable explanation for any variance will result in a report to the DfE who will determine appropriate follow-up action. So it’s important you get everything right.

1 The correct paying-in slip should be completed each month to provide an accurate statement along with the contributory salary bill on which the contributions are based. This should be completed and submitted via the Employer Portal.

2 The teachers’ and employers contributions must be collected at the appropriate percentage of the teachers monthly contributable salaries. If not, you need to provide an explanation of the variance.

3 Remittances must be made to the Teachers’

Pension Scheme on or before the seventh of the month following the month the contributions relate to. Regardless of the method of payment used, the Employer Portal paying-in slips must be completed and returned to Teachers’ Pensions by no later than the payment date.

4 For employers using third party payroll providers a separate monthly slip is required for each employer. For LAs providing services for Academies, a separate slip should be provided for the LA and each academy.

Section 3: Scheme administration Employer guide 38