Understanding Additional Pension
The Teachers’ Pension Scheme (TPS) offers an “Additional Pension” option that allows members to increase their retirement income by making additional contributions. This option is available to all active members of the TPS, regardless of their age or length of service.
How Additional Pension Works
Additional Pension contributions can be made in two ways:
- Salary deductions: Members can choose to have a portion of their salary deducted and paid directly into their Additional Pension pot.
- Lump sum payments: Members can make one-off lump sum payments into their Additional Pension pot.
The maximum payment period for Additional Pension contributions is 20 years, and contributions must be completed before the member reaches their Normal Pension Age (NPA). The NPA is the age at which members are eligible to claim retirement benefits without actuarial reduction.
Benefits of Additional Pension
There are several benefits to contributing to Additional Pension:
- Increased retirement income: Additional Pension contributions will increase your retirement income, providing you with a more comfortable retirement.
- Index-linked: Additional Pension is index-linked, meaning that the value of your extra pension increases in line with the cost of living. This helps to ensure that your purchasing power is maintained throughout your retirement.
- Tax-efficient: Additional Pension contributions are made from your pre-tax salary, which can reduce your tax liability.
- Flexibility: You can choose how much you want to contribute to Additional Pension and how you want to make your contributions.
How to Apply for Additional Pension
To apply for Additional Pension, you will need to complete a “Flexibilities Application Form” and submit it to your employer. The form is available on the Teachers’ Pensions website.
Additional Information
- The cost of Additional Pension is reviewed after each scheme valuation, which takes place every four years. This means that contributions may increase or decrease depending on the outcome of the valuation.
- If you choose to take your retirement benefits before you reach your NPA, your Additional Pension will be actuarially adjusted to reflect the fact that it will be in payment for longer.
- You can choose to convert part of your Additional Pension annual benefit to a one-off tax-free lump sum when you take retirement.
Additional Pension is a valuable option for members of the TPS who want to increase their retirement income. It is a flexible and tax-efficient way to save for your retirement and ensure that you have a comfortable retirement lifestyle.
Frequently Asked Questions
How much can I contribute to Additional Pension?
You can contribute any amount you wish to Additional Pension, up to a maximum of £250 per annum.
How long can I make contributions for?
The maximum payment period for Additional Pension contributions is 20 years.
What happens if I leave the TPS before I have completed my contributions?
If you leave the TPS before you have completed your contributions, your Additional Pension will be based on the contributions you have paid up to the date you leave the Scheme.
Can I take my Additional Pension as a lump sum?
You can choose to convert part of your Additional Pension annual benefit to a one-off tax-free lump sum when you take retirement.
Where can I find more information about Additional Pension?
You can find more information about Additional Pension on the Teachers’ Pensions website.
An introduction to the Teachers’ Pension Scheme
You may have entered the teaching profession for the holidays. But you may also soon discover that vacation time is a myth and that your hours aren’t really all that longer than in other professions. It is therefore encouraging to know that the tales you have heard about the Teachers’ Pension Scheme’s generosity are well-founded.
Should you choose to pursue a career in teaching at this time, you will be included in the career average scheme. Teachers who have worked for a long time will either receive the final salary or a combination of both. Although the career average is not as generous as the final salary plan, depending on your earnings and length of service, it might still be enough to support you comfortably in retirement. An annual benefit equal to one-fifth of your pay will be awarded to you. Since this is index-linked, its annual growth will be equal to the Consumer Prices Index (CPI) plus 1. 6%.
How much you pay depends on how much you earn. You will be expected to contribute more as your income increases. Additionally, and in proportion to your contribution, your employer will also make a contribution.
The current pension age is 65, but by October 2020, it will rise to 66. You can take your pension as income when you retire, or as a combination of income and capital.