These are strange times. Nothing that we thought we knew stands right now. This can lead to significant uncertainty and concern about the future. The current changes to employment can have an impact on your Teachers’ Pension. Here we offer some guidance to help you understand the consequences for you.
The official Government website offers a lot of specific guidance on COVID-19 and the financial support for the education sector. You may wish to the DfE site to get more detailed and specific advice.
Some employees are being paid under the Government’s Coronavirus Job Retention Scheme (CJRS). This is known as being furloughed. You are asked not to work, but you will still receive a proportion of your pay. It is expected that most schools will not use the CJRS furloughing, as employers receive public funding to cover staff costs. This might not be true for some independent, public, and private schools.
Furlough and your pension
As most teachers working in the state sector are not expecting to be placed on CJRS, there will be no impact on your pension. Your salary and the deductions from this salary will continue as usual.
If you are furloughed, your furlough pay is pensionable. The level of your contributions should be deducted in proportion to what you are paid when furloughed. If your employers top up this pay, your contribution will be determined from the furlough pay plus the top-up money. In short, if your employer tops you up to 100%, your pension contributions will remain unchanged.
When furloughed, the Teacher Pensions’ Scheme is asking employers to record your service as part-time. This will allow any insurance benefits, such as in-service Death Grant and ill-health pensions will remain unaffected. This part-time recording of service is done based on the full-time equivalent (FTE) salary. Your average wage will be calculated using the FTE salary.
Your pension is proportionate by your pensionable pay. Therefore, during a period of furlough, you will be paying in less right now. If you are earning 20% less than your accrual will also reduce by 20%. If you are in a Final Salary arrangement, the amount of reckonable service will be 20% less. The impact on the Final Salary arrangement is likely to be minimal, as the time of reduction should be relatively short.
There is no need to sit and worry. If you have questions, contact your independent financial advisor or email the Teachers’ Pension Scheme website. It is better to be informed when you are feeling worried than leaving yourself gripped with uncertainty.
The content in this article was correct on 25th April 2020. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on the different types of retirement available with the Teachers’ Pension Scheme. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.