This is an appallingly bad presentation of figures sent to a teacher – I have “mentioned” this to the TPS and the teacher is making their own complaint…along with two others that have also contacted me with the same problem.

They have been given two “totals” but the totals come from two different time periods, 3 years apart.

The totals given to them make it look as though one of the options will pay £1800 more than the other, but when the pensions are valued to the same date the difference is only £1000. As there is also a significant gap in the lump sums someone could easily have made a different choice based on the figures as presented.

At no point in time would the pension total given in this example for Option 2 ever had been paid…it is just complete and utter nonsense!

My message to the TPS Administration

Here is what looks like a MAJOR systemic problem with RSS’s being provided to teachers who took their final salary pension WITHOUT taking their career average one and who are now applying for the career average. Please do pass on my concerns about this, I have now seen 3 of these and have asked the members to make their own complaints to you. However, given that this no longer appears to be an isolated case I am posting this here.

The problem:
1) The final salary pension is given the value it would have had at the time it was taken, in the example here (posted with the permission of the owner), that is to 1 March 2022.

2) The career average pension is given a value to a different date. In this example to 18 May 2025.

3) These two values are then added together to give the “Total Annual Pension” which is a nonsense.

The final salary row is valued to 2022 and the career average to 2025. To get a comparable total they must BOTH be valued to the SAME DATE.

For reference I have overlaid the image of their RSS with those calculations using the PI factors published for such by the Government.

The consequences:
The RSS as provided suggests that there is a difference of £1,833.60 in the annual pensions between options 1 and 2. The reality is that the difference is £1,051.42.

A reduction in the difference of well over 40%.

The production of these figures for those in the situation I describe MUST be halted immediately and anyone who has been sent such figures and made their choices based on such misleading numbers must be contacted, provided with comparable figures set in the same time frame and be permitted to change their choice if it has already been made.

I do always feel a bit like Marie Antoinette telling others to “Let them eat cake” when I talk about this aspect of the scheme – and note a trigger warning, I will be talking about death and distressing circumstances shortly.

VALUE FOR MONEY

The pension is better value for money whilst on maternity leave.

You pay the same % of your wage throughout, but as maternity pay drops this means you pay less. (I will assume 10% = £400)

For this however, the amount your pension gets credited with (1/57th) remains the same all the time you are on at least statutory maternity pay. (£70)

In £ terms.

• Weeks 1-4: 100% pay. £400 a month from you. Pension increases by £70.
• Weeks 5-6: 90% pay. £360 a month from you. Pension STILL increases by £70.
• Weeks 7-18: 50% pay. £200 a month from you. Pension STILL increases by £70.
• Weeks 19-39: SMP. £61 a month from you. Pension STILL increases by £70.

(With tax you would only get 80% of the amounts you pay into the pension).

DEATH

My apologies but I am going to be blunt.

Take a worst case scenario. You die and your child (or children if twins etc) survive.

Having opted out they would miss out on:

1) the much greater death-in-service grant

(Three times what would be your full time salary instead of, roughly, three times your pension), and

2) the enhanced survivor’s pension for the next 18-23 years of their life (lives).

(The enhancement adds half of what you would have added to your pension between now and your state pension age).

Your partner would also miss out on getting an enhanced survivor’s pension as well.

LET THEM EAT CAKE

Whilst I would urge you not to leave the pension scheme I appreciate that I do so from a position of privilege, if you are in a position where this makes the difference you decide is critical then it is one you can make, I hope that what I have said though allows you to do it with a greater understanding of what the cost to your pension might be.

When you go to opt out you get “warned” about doing this with a list of what they consider the dire consequences…bear in mind that this list is aimed at those who are thinking about opting out of the pension scheme for good and not those who are looking to “lock in” a good set of salaries that could soon become too old to be used and may be lost forever without such action. Opting out to invoke the protective hypothetical calculation is not the same as leaving altogether.

However, the warnings do worry people – that is the intention, after all, to make those thinking about leaving, pause for thought. There are some parts that are relevant but here I go through each of the points being made.

my employer contributing towards the cost of my benefits (23.6% of your pensionable earnings);	1) Employer contributing 23.6%. It doesn’t matter how much they contribute. The calculation of your final salary is based on rules and not on how much money is paid into the scheme. Opting out to use the hypothetical calculation “rule”, to stop the value falling is the point of doing this. It is one of the most counter-intuitive rules that means you can get MORE by paying in LESS (one month less). But it is a rule and there to be used if you are aware of it. (oh and it is rising to 28.6% in April 2024 – but it still doesn’t matter)
a guaranteed pension at Normal Pension Age (NPA);	2) Guaranteed Pension at NPA You do not forfeit your right to what you have already bought and paid for in the scheme. Indeed what you are doing is locking in what you hope is likely to give you a BETTER guaranteed pension, at the same NPA. (Opting out for a single month means you come back into the same scheme you would have been on if you hadn’t opted out. Only a break of more than 5 years can change that, AND only if they changed the scheme during that break)
the option to take a tax free lump sum;	3) Tax-free Lump Sum entitlement Unless they change the rules of the scheme this doesn’t happen. Again you would have to be out for more than 5 years and the change happen whilst you were out.
pension value protected through full index linking;	4) Pension value protected through index linking. Yes, this is the whole point of opting out, to lock in what have turned out, already, to be HIGHER valued salaries from the past before they get to old to be used. Indeed, opting out, for just one month, is protecting the pension’s value – it is staying in, without a break, that could lead to a loss of value if your best salaries get too old to be used in the calculation of the pension.
access to ill-health benefits, should I become permanently unable to teach;	5) Access to ill-health benefits. YES, this one has some merit and is the reason why many suggest taking out extra insurance for the month you are out of the scheme. However, note that you do not “lose” those benefits permanently, they are restored, in full, upon re-joining the scheme. Note also that for your to become so suddenly ill during a single month out that you were fully incapacitated would be highly unusual. You get 6 months full sick pay and 6 months half sick pay, so unless you are already exhausting your sick pay entitlement it would be highly unusual for you to suffer a loss in this regard during a single month out.
children’s and dependants’ pensions;	6) Dependent’s Pensions YES, again, this one has some merit and the point about insurance above applies. Dependent pensions, those given when you die, are much better if you are “in” the scheme at the time you die. The pension is enhanced by adding on half of what you would have added to the pension between the date of your death and your state pension age. Then a partner would get 37.5% of that and dependent children up to half what the partner would get.
in-service death grant;	6) Death Grant YES, same as above, if leaving money to your heirs is important then consider taking out extra insurance.
if you are a final salary member, you may also be giving up certain protections.	7) Final Salary Benefits This ONLY applies if you are out of the scheme for more than 5 years. The benefit referred to here is being able to use future salaries in the calculation of the final salary pension. Being out for a single month has NO impact. Also, given that you are opting out because the salaries from 8 to 10 years are are better than your current salary it would take some significant pay rises in the future for your future salaries to catch up and then overtake the ones you are locking in anyway!

Over 90% of problems with the pension can be traced back to incorrect records being sent in to the administrators by employers.

The responsibility for putting errors right lies with the employer, the administrators (TPS) of the scheme have very limited powers to alter the records they have been sent, mainly only in cases where the employer no longer exists.

How to correct the problem?

Contact your employer and explain the problem and ask them to correct it.

They may be willing to do that immediately but with many employers no longer keeping records for more than 7 years you may find that they want YOU to prove that they employed you and that you were in the pension scheme.

Evidence?

PAYSLIPS: The very best evidence is your pay slips that show that the school employed you AND that you were paying into the pension scheme. The problems if often that we no longer have our pay slips and it can be many years, decades even, in the past that the problem exists.

NATIONAL INSURANCE RECORDS (Pre-2016): HMRC keep records going back to the day you were issued with a number! As such you can ask them for this data and it is, for employment before 2016, very useful proof.

Before 2016 teachers who were paying into the TPS paid a special rate of National Insurance and so this is recorded by HMRC. It is called the “contracted out” rate. Ask TPS for your records of employment and the NI rate and it will show you, for periods up to 2016, both who employed you and whether you were in the TPS or not.

Getting your records

Make a “Subject Access Request”: https://www.gov.uk/guidance/hmrc-subject-access-request

Ask HMRC for the following:

• Name of employer and dates of employment
• Were they “contracted out” of the additional state pension
• The name of the pension scheme the employer reported as justification for being contracted out
• The ECON and SCON identifiers for that pension scheme

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Getting Action

If you are in a Union see if they can get you legal help to draft a proper letter advising the employers of their legal responsibilities and potential liabilities if they fail to address this issue in a timely fashion. If you are not in a Union then check to see if you have legal protection included on your home insurance.

You also have the option to refer the matter to the Pensions Ombudsman for “maladministration”.

The kind of thing that we have heard can get results is to “remind” the employer of the potential costs to them if they do not get it sorted, nagging them repeatedly and making it “easier” for them to resolve the situation – keep squeaking.

Run this by a lawyer but something along the lines of…”The records of my employment history for the purposes of calculating my pension as held by the Teachers Pension Scheme administrators (TPS) for my time in your employment from dd/mm/yyyy to dd/mm/yyyy are wrong. I am informed by the TPS that only you as the employer may make corrective updates via the monthly data collection that they require you submit to them. I have also been advised that should <name of employer> fail to make the necessary corrections in a timely manner and that as a result I were to suffer any unavoidable financial losses then <name of employer> may become liable to cover such losses. The Pensions Ombudsman may in addition, upon finding a case of maladministration, direct the employer to make financial compensation for distress and inconvenience. The scale of such compensation rising when the employer has not demonstrated that they have taken action to address the complaint. As I have not heard from you since I last communicated on this matter since dd/mm/yyyy then I must start to consider taking such actions.

My preference is, of course, to have the records held by the TPS in respect of my employment with <name of employer> updated to correctly reflect my service with <name of employer>. Specifically ((((now insert what you want the data to show)))).To avoid increasing the anxiety this matter is causing me and to alleviate the distress please can you communicate to me within 15 working days what steps you have taken to provide the TPS with the necessary corrective update to the employment records held by them on your behalf.”