Before starting this guide, make sure you have downloaded the PDF version of your TP Benefit Statement first (see Guide 1 for help with doing this).
You will see a lot of talk in the facebook group about ‘opting out for a month’ and ‘Method A/ Method B’. These videos and guided help, along with spreadsheets, can help you identify whether you might benefit from taking a break or not.
NOTE: This guide does NOT apply to teachers who have ONLY Career Average pension.
It applies to teachers who have some pension in either of the TP Final Salary schemes. S
COTLAND and NORTHERN IRELAND – note that, unlike England and Wales, you cannot (apparently) create a break that will invoke the protective calculation just by opting out and back in again, you need to have a break in employment itself.
- Quick Check
- Why a break can work to your advantage
- Breaks before April 2022
- A “Decision Tree” interactive guide
- Opt-Out Warnings
- Steps to take a break
How to Check Your Method A/ Method B – Quick Check
David Fountain takes 8 minutes to explain how to check your TP Benefit Statement to see if you might need to take action to protect your Method B salaries from dropping out of the ‘last 10-years window’. You will need your TP Benefit Statement to hand.
https://www.youtube.com/watch?v=7WxJl1f4bmM
WHY You MAY Need to Opt Out for a Month IF You Have ANY Final Salary TP
This 15-minute video is for people who want to understand the ‘why’ behind opting out of TP for a month and then back in again. David Fountain explains the principle behind opting out of TP for one month and how it relates to the ‘HYPOTHETICAL CALCULATION’: https://www.youtube.com/watch?v=qP5XkqTM1f8
NOTE: Opting out of TP for a month and back in again only applies to teachers in England and Wales (TP). Different rules apply to teachers in Scotland (SPPA) and teachers in Scotland (NITPS)
What is the ‘HYPOTHETICAL CALCULATION’ and How Might It Affect You?
Breaks in ‘pensionable service’ (leaving the TP scheme but not necessarily employment) invoke a protective rule known as the ‘hypothetical calculation’.
Knowing if you need a break from TP, and when to take one, may prevent you losing thousands. Personal experience of this ‘quirk’ in TP scheme is what motivated David Fountain to begin this Facebook group, his youtube channel and website.
1) If you have breaks from before April 2022, then this 14-minute explains the ‘hypothetical calculation’ in greater detail.
The video includes a section on the ‘restricted’ versus ‘unrestricted’ versions of the protection provided by the hypothetical calculation and will be of particular interest to those teachers that have been in a higher-salary promoted position and stepped into a lower-paid position after taking a break:
2) A link to a factsheet on the TP website regarding hypothetical calculations:
The Opt-Out-and-In ‘Decision Tree’
It is especially important to use the decision tree if you have had a previous break in pensionable service before 1st April, 2022.
If you get stuck with filling it in, ask in the group
OPT-OUT WARNINGS
If you try to opt out of TP online, you will – quite rightly – be presented with a set of warnings. Many of the warnings relate to opting out permanently but some relate to opting out for even a short time. David Fountain addresses each warning in turn.
https://dfountain.co.uk/opting-out-warning-tps/
STEPS TO OPT OUT OF TP FOR A MONTH AND BACK IN AGAIN
WARNING 1: If you work in an independent school who is withdrawing from TP, speak to your payroll/ office to check whether you will be allowed to rejoin TP if you opt out.
WARNING 2: Opting out of TP for a month and in again to preserve your pension value only applies to teachers in England and Wales (TP). It does not apply to Northern Ireland (NITPS) or Scotland (SPPA).
- Let your SBM/ payroll department know what your intentions are. As well as being a courteous thing to do, keeping them in the loop will, possibly, help the process run more smoothly.
Don’t be surprised if they show professional curiosity at your decision. Many payroll professional are unaware of why you may want to take this course of action.
- Find the section entitled ‘Opt-Out’ on this page of the TP website: https://www.teacherspensions.co.uk/…/joining-or-leaving… and follow the instructions.
- It is best to avoid submitting your form too close to the 1st day of the month. As a rule of thumb, submit your opt-out form by 24th of the month. This is because TP do their data collection on the 1st of the month. Your payroll dept need processing time.
NOTE: Your opt-out should be actioned on the 1st of the month after you submit your form.
- You will see a set of warnings presented to you when you are applying online to opt out of of TP.
David Fountain addresses the warnings here:
https://dfountain.co.uk/opting-out-warning-tps/
NOTE: Pay special attention to the warnings 5 and 6 (written in blue text)
- Submit your opt-in form at least one month after you submitted your opt-out form.
You can find the opt-in form on the same TP webpage mentioned in bullet point 2. Look for the section entitled ‘Election to join the Teachers’ Pension Scheme (Opting in)’. Follow the instructions.
Some people like to wait to check their pension contribution hasn’t been deducted from their payslip before submitting their opt-in form.
NOTE: Your opt-in should be actioned on the 1st of the month after you submit your form.
- Be aware there is a time lag on the TP website. So, in the month you opted out, your account will show you as an active member. In the month you have opted back in, you will, most likely be shown as a deferred member. The following month should show you as an active member again.
- Make a note of your Method A / Method B at the point you opt out. Or download your TP Benefit Statement and keep it somewhere safe.
This is because hypothetical calculations are not shown on your TP Benefit Statement so knowing your Method A/ Method B at the time of the break caused by opting out is useful.