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Pension scheme

Leaflets

Retirement arrangements and Planning

Leaflet - Retirement arrangements and planning

Contents

Types of retirement

How retirement benefits are calculated

Increasing your benefits

Potential restrictions or reductions to your benefits

Index-linking

Lifetime Allowance (LTA)

How to apply for benefits

Returning to work as a teacher after receiving a teacher’s pension

Your teacher’s pension is an important part of your remuneration package and a well deserved benefit. The information in this section will help you to plan well for your retirement, informing you about the flexibilities and options the Northern Ireland Teachers’ Pension Scheme (NITPS) offers you as a valued scheme member.

For example, you may find it useful when planning for the future to:

know how you can increase your pension benefits and
understand the retirement process including phased retirement.

Qualification period

To qualify for retirement benefits you must normally have two years’ pensionable teaching service.

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Types of retirement

Normal Age Retirement

Age retirement benefits are payable when you reach Normal Pension Age (NPA) or from the day after you leave pensionable employment (whichever is the later).
If you continue in teaching after your 75th birthday, further service cannot be treated as pensionable and retirement benefits are payable from your 75th birthday.
If you want to receive a lump sum then your benefits must be paid before you reach age 75.

Actuarially Reduced Benefit (ARB)

You may claim retirement benefits if you are 55 or over, under NPA and have been in pensionable teaching employment on or after 1 April 2007 and leave employment.
If you are applying for ARB and you are still in pensionable teaching, you must leave that employment with the consent of your employer before you can access your retirement benefits.
Employers cannot withhold their consent for longer than six months from the date on which you request to leave.
ARB is paid from the day after the last day of pensionable employment.
If you are not in pensionable employment, you may choose the payable date, but benefits will not be paid any earlier than six weeks after the date you signed the application form.
The actuarial reduction will apply throughout the time your benefits are in payment.

Phased retirement from age 55

You may take phased retirement without having a break in employment provided that your pensionable salary will reduce by at least 25% for a minimum of 12 months.
This could, for example, be because you have taken up a post of lesser responsibility or because you are working reduced hours.
You will need to discuss this arrangement with your employer and they will be required to provide confirmation of the salary reduction on your application form.
You may exercise this option twice before final retirement.
You can decide how much you wish to take of the benefits you have accrued up to the commencement of phased retirement, up to a maximum of 75% of your total benefits.
Remaining service, which must be at least 25%, will be aggregated with the subsequent service you accrue being used in any future benefit calculations.
Phased retirement benefits taken before Normal Pension Age would be subject to actuarial reduction.

Premature retirement

Retirement benefits may be paid if you are:

a) 50 or over; or

b) 55 or over and joined the scheme on or after April 2006; or

c) 55 or over for all members from April 2010

and your employer certifies that your pensionable employment has been terminated because of redundancy or in the efficient discharge of the employer’s function

There is no automatic right to premature retirement; it is at the discretion of your employer.
If you have any queries about premature retirement arrangements, you should discuss them with your employer.

Ill health

Ill-health benefits may be paid if you become permanently unfit due to illness before you reach NPA.
Further information is available in leaflet Ill-health retirement benefits.

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How retirement benefits are calculated

If you were a scheme member (existing member) before 1 April 2007, your benefits are made up of an annual pension and a lump sum that are calculated using your pensionable service and average salary.
If you became a scheme member (new entrant) on or after 1 April 2007, you will receive only an annual pension although you may give up part of your pension in favour of a lump sum.
There are transitional arrangements for existing scheme members who were out of service prior to 1 April 2007 and who re-enter the scheme after that date.
For further information about average salary see the Average salary fact sheet.

Pension

Existing member – the pension is 1/80th of the average salary for each year of pensionable service. The pension is taxable.
New entrant – the pension is 1/60th of the average salary for each year of pensionable service. The pension is taxable.

Lump sum

Existing member – the tax-free lump sum is 3/80th of the average salary for each year of pensionable service. If you have pensionable service on or after 1 April 2007 you may increase this lump sum by commuting £1 of pension, which will increase your lump sum by £12.
New entrant – there is no automatic lump sum, however, to get a lump sum you can commute £1 of pension for £12 of lump sum.
You can commute up to 25% of your total fund value.

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Increasing your benefits

Additional pension

You can only buy additional pension while you are in pensionable employment.
You can buy an additional pension up to a maximum pension of £5,000 per annum. You can do this at different times in multiples of £250.
You can pay by a lump sum or a regular monthly payment.
Any instalment period must be completed before you reach NPA.
Instalment payments will be subject to periodic review and may change during the period of the instalments.
You have the option to buy personal benefits only or personal benefits and partners’ benefits.
It is not possible to buy partners’ benefits only.
If you leave pensionable employment before completing an instalment plan, you will have the opportunity to pay the balance in a lump sum or take a paid up credit.
If you retire before completing an instalment plan you will receive a pension based on the contributions you have paid.
If you retire on health grounds before completing an instalment plan, you will receive the full value of your additional pension provided that TPB received a valid health declaration at the start of the payment period and the payments have been made for more than 12 months.
Additional pension benefits are index-linked from the date of the first contribution.
Additional pension benefits are affected by any re-employment abatement.
If you have arranged to purchase additional pension for your partner, then a pension will be paid to your surviving partner on your death.
If you die and have only arranged to purchase additional pension for personal benefits no additional death benefits will be paid.

Additional Voluntary Contributions (AVC)

To increase your own benefits or family benefits you can pay Additional Voluntary Contributions (AVCs).
The money you pay is invested for you by the AVC Company and the benefits you receive depend on the value of the investment and the cost of annuities when you retire.
You can take 25% of the fund value as a tax-free lump sum.
AVCs do not increase the benefits you receive from the NITPS. They are a separate arrangement.
Prudential is the AVC provider for members of the NITPS, but you can choose to make arrangements with any other provider.

Other pension arrangements

Members of the NITPS may contribute to any other pension arrangement as well as contributing to the NITPS.
You may wish to consult your financial adviser about other arrangements.

Transferring in

If you have pensionable employment in another scheme, it may be possible to transfer it into the NITPS.
You must apply within one year of entering pensionable teaching.
Your previous scheme will offer an amount of money called a transfer value, which you can use to buy service in the NITPS.
The service may be different to the actual length of your service in the previous scheme.

For further information see the Transfers In leaflet.

Restoring service

If you received a repayment of your contributions before 1 June 1973 and are currently in pensionable service, you can repay those contributions and restore that service in the NITPS.
You will have to pay compound interest at 3.5% per annum as well as repaying the original contributions.

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Potential restrictions or reductions to your benefits

Possible salary restrictions

If your final year’s salary is used to calculate your benefits and you received an increase of more than 10% plus the standard salary increase, your salary will be restricted if your employer is not prepared to meet the additional cost of the difference in benefits.
When your application for retirement benefits is received, TPB will calculate benefits using both the restricted and unrestricted average salaries.
TPB will notify your employer of the sum required, known as the ‘additional contribution’.
If your employer pays the additional contribution, you will receive your benefits calculated using the unrestricted average salary.
It is not possible to anticipate if this provision will apply in advance of a known retirement date.
If you are approaching retirement and you think it is possible that your average salary might be affected, you should discuss this with your employer.
This provision will not apply if the salary used in the calculation of your benefits is the average of the best three consecutive years’ salary in the last ten years.
Transitional arrangements apply to the average salary from 1 April 2007 to 31 March 2009. During this period, salary restrictions may apply during the final three year period rather than just the final year.

Multiple employment

If you are employed by more than one employer when you apply for retirement benefits, you must discuss your proposed retirement arrangements with all your employers.

Outstanding contributions on retirement

If you are still paying additional contributions for purchasing additional service or family benefits from your salary when you retire, it may be possible to pay the remaining balance or for you to receive a pension based upon your payments to date.

Important Note

If you are intending to use 30% or more of your lump sum to increase your pension benefits, this could result in Her Majesty’s Revenue and Customs (HMRC) subjecting the whole of your lump sum to a tax charge of 40% and a further 15% surcharge if the proportion of your lump sum that you use exceeds 25% of your pension rights in the scheme.
If you are retiring on or after NPA and the contributions relate to additional family benefits, you will be required to pay the full amount of outstanding contributions.
Any outstanding amounts are deducted after any actuarial reduction has been applied.

Pension sharing

If your benefits are subject to a pension sharing order, you should read this leaflet in conjunction with the leaflet Pensions on Divorce and Dissolution.

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Index-linking

Your pension will be increased annually each April in line with the Retail Prices Index (RPI), in order to maintain its purchasing power.
The rate of increase will not mirror any rate of increase in teachers’ pay; it may be higher or lower.
If your pension is paid before your 55th birthday, this increase will not be paid until after that birthday unless you have been premature retired and have dependent children or you are incapacitated in which case benefits are increased annually regardless of your age.

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Lifetime Allowance (LTA)

The LTA takes account of the total value of an individual’s pension benefits, excluding state benefits and dependants’ pensions, across all registered schemes.
The amount of the allowance in 2006/07 is £1.5 million and this will increase annually.
When retirement benefits are drawn, the value of all pension scheme benefits are added together and tested against the LTA.
Any benefits above the LTA will be subject to a tax charge.

To assess whether you would be affected the following formula should be applied to your benefits:

(Annual Pension x 20) + Lump sum divided by Lifetime Allowance x 100 = LTA%

If the percentage exceeds 100%, you will be liable for the LTA charge unless you have a transitional protection certificate.

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How to apply for benefits

You can obtain the relevant application form from your employer.
You can also download the forms from the DE website www.deni.gov.uk link Teachers/Pensions/Forms.
Many members retire at a common date, usually the end of a school term, so you should aim to complete and submit your retirement application early, at least four months before peak dates.
If you are paying extra contributions and the contribution period will go beyond your retirement date, please contact TPB about the outstanding payments.
The date you receive each pension payment will be the last working day of the month.

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Returning to work as a teacher after receiving a teacher’s pension

You must inform TPB immediately if you take up any teaching employment.
If you are in receipt of ill-health benefits, your pension will cease.
If you take phased retirement and continue in pensionable employment, your pension will not be reduced and subsequent service will be pensionable. If the conditions of your new employment subsequently change, you should notify TPB to confirm whether your pension will be affected.
If you retired on Actuarially Reduced Benefits, any subsequent employment will not cause your pension to be reduced. If you retire on premature or age grounds then, depending on level of earnings, your pension may be reduced.
If you become re-employed in teaching after receiving your pension, following final retirement, that employment will not be pensionable.
All future employment covered by the NITPS or by the teachers’ schemes in Scotland and England and Wales may affect your pension.
For further information about returning to work, see the ‘Returning to work after receiving pension benefits’ fact sheet

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