Teachers Pension Scheme 2015 · CAS-31314-P9H9

CAS-31314-P9H9

Ombudsman’s Determination Applicant Mr S

Scheme Teachers' Pension Scheme 2015 (the Scheme)

Respondent Teachers' Pensions

Complaint Summary

Summary of the Ombudsman’s Determination and reasons

Detailed Determination Material facts

The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

The Teachers’ Pensions Scheme Regulations 2014 (the 2014 Regulations), established the Scheme. Benefits accrue on a career average re-valued earnings (CARE) basis.

Section 10 of the Public Service Pensions Act 2013, states that the normal pension age (NPA) of a person under the Scheme, is state pension age, or 65 if that is higher.

On 1 April 2015, Mr S joined the Scheme. His annual salary was £110,000 (the Salary).

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In April 2015, Mr S made a faster accrual election.

On 14 April 2015, Teachers’ Pensions confirmed that it had accepted Mr S’ election to purchase “a Faster Accrual rate of 1/50 in respect of the 2015/2016 Scheme year only” (the April Letter). Teachers’ Pensions advised that the cost would be an “additional 3.94% per month” in contributions.

The April Letter said that the cost of the faster accrual election would be deducted from Mr S’ pay from 1 April 2015 to 31 March 2016. The April Letter also said that instructions, for collecting the additional contributions, had been sent to Chelmsford College (his Employer).

Teachers’ Pensions asked Mr S to contact his Employer immediately if he suspected that the deduction was incorrect. Teachers’ Pensions emphasised that it was Mr S’ responsibility to ensure that the correct amount was deducted from his salary.

On the same day, Mr S received confirmation of his faster accrual election electronically from Teachers’ Pensions (the April 2015 Notice). It showed a salary figure of “110000”; an “accrual result” of “363.000000”; and an “Accrual Cost (%)” of “0.3.490000”.

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On 1 July 2015, Mr S received confirmation of his Buy Out Election electronically (the July 2015 Notice). It showed an “Accrual Amount Result (£)” of “3500.64;” and an “Accrual Cost Result (%)” of “01.60.”

1.60% of the monthly equivalent of Mr S’ Salary amounts to approximately £146.

On 3 July 2015, Teachers’ Pensions wrote to Mr S and confirmed that his election to buy out the actuarial adjustment on his CARE benefits had been accepted from 1 April 2015 (the July Letter).

The July Letter explained that:

“…subject to the continued payment of the necessary contributions, if you retire before your Normal Pension Age (NPA) of 67 the standard 3% actuarial reduction to your benefits, for 2 years between age 65 and your NPA, won’t be applied. The standard reduction of, approximately 5% will continue to apply for each year you draw your benefits prior to reaching your 65th birthday.”

The July Letter also explained that an “extra pension contribution” equivalent to 1.60% of pensionable salary, would be deducted in addition to Mr S’ “standard monthly contribution.”

Teachers’ Pensions had sent

Teachers’ Pensions emphasised that it was Mr S’ responsibility to ensure that the correct amount was deducted from his salary and to contact his Employer immediately if he suspected it was incorrect.

On the same day, Mr S received confirmation of his faster accrual election electronically. It showed a salary figure of “110000”; an “accrual result” of “363.000000”; and an “Accrual Cost (%)” of “0.3.490000”.

3.49% of the monthly rate of Mr S’ Salary amounts to approximately £319.

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The following month, Mr S made a further faster accrual election. He also received confirmation of this electronically (the 2016 Notice).

The 2016 Notice showed a salary figure of “110000”; an “accrual result” of “395.650000”; and an “Accrual Cost (%)” of “0.3.780000”.

3.78% of the monthly rate of Mr S’ Salary amounts to approximately £346.

Teachers’ Pensions has said that Mr S was notified on 27 February 2017 (the February 2017 Letter) that the monthly cost would be an additional 3.82% and this would be deducted from his pay over the 2017/2018 Scheme year. Teachers’ Pensions has also said that the February 2017 Letter advised that it was Mr S’ responsibility to ensure that the correct amount was deducted from his salary and to contact his Employer immediately if he suspected it was incorrect.

On or around March 2017, Mr S received confirmation of his faster accrual election electronically (the 2017 Notice). It showed a salary of “110000”; an “accrual result” of “395.650000”; and an “Accrual Cost (%)” of “0.3.820000”.

3.82% of the monthly rate of Mr S’ Salary amounts to approximately £350.

In certain circumstances, a member can elect for the pension scheme to pay their annual allowance charge in return for a reduction in their pension benefits. This is called “scheme pays.” 4 CAS-31314-P9H9

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Adjudicator’s Opinion

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Alleged inaccurate statements on the part of Teachers’ Pensions

Failure to identify non-payment of the buy out contributions for a period of three years

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Conclusions

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Directions

Anthony Arter

Pensions Ombudsman 22 November 2022

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Appendix The Teachers’ Pensions Scheme Regulations 2014

“Part 4 Election to Buy Out the Standard Reduction

Chapter 1

Making a Buy-Out Election

Eligible to make buy-out election

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(1) A member (P) who has a normal pension age over 65 may elect to pay

contributions to buy out the standard reduction (“buy-out election”) for a period of up to 3

years [insofar as this relates to P's—

(a) standard earned pension; and

(b) faster accrual earned pension (if any)].

(2) A buy-out election has effect from the day on which the scheme manager accepts

the election.

(3) A buy-out election ceases to have effect when the earliest of the following

occurs—

(a) P reaches normal pension age;

(b) a retirement pension other than a phased retirement pension becomes payable to

P;

(c) P revokes the election or is taken to revoke the election.

(4) A buy-out election may only be made within 6 months after P enters pensionable

service under this scheme.

(5) When making a buy-out election, P must be—

(a) in pensionable service; and

(b) under normal pension age.

(6) P may by written notice to the scheme manager vary a buy-out election if P's

normal pension age changes before a retirement pension becomes payable to P. 15 CAS-31314-P9H9

Making a buy-out election

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(1) A buy-out election made by a member (P) must state the number of years in

respect of which the standard reduction is to be bought out.

(2) A buy-out election must be made by written notice to the scheme manager.

(3) The notice of election must specify—

[(a) if P is in more than one eligible employment, the names of the employers in

relation to P's eligible employments;]

(b) P's name;

(c) P's date of birth;

(d) P's normal pension age;

(e) the date on which P entered pensionable service;

(f) P's annual rate of pensionable earnings for that employment.

(4) The scheme manager may ask P to provide further information.

Accepting a buy-out election

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(1) The scheme manager may accept a buy-out election by giving written notice to the

person who made the election (P).

(2) The notice must state the buy-out value.

(3) A buy-out election is accepted when P receives notice that the scheme manager

has accepted the election.

Determination of the buy-out value

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(1) The buy-out value is an amount determined by the scheme manager.

(2) If an additional pension election or a faster accrual election is subsequently made

in respect of a person (P), the scheme manager may—

(a) re-determine the buy-out value; and

(b) send a written notice to P stating the re-determined buy-out value.

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Chapter 2

Payment of Buy-Out Contributions

Determination of contributions payable

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(1) The scheme manager must determine the amount of the monthly payments to be

paid in respect of a buy-out election.

(2) The scheme manager—

(a) may determine the amount of the monthly payments by reference to the number of

years stated in the buy-out election and the length of the contributions payment period;

and

(b) may exercise the functions under this paragraph so as to re-determine the amount

of the monthly payments during the contributions payment period.

(3) Unless the scheme manager re-determines the amount, monthly payments

following a gap in service not exceeding 5 years are the same as before the gap.

Payment of buy-out contributions

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(1) A member (P) must—

(a) make the first monthly payment within 2 months after the end of the month in

which a buy-out election is accepted; and

(b) continue to make the monthly payments until the end of the contributions payment

period.

(2) The final monthly payment is due in the month before the buy-out election has

effect.

(3) If the scheme manager re-determines the amount of the monthly payment during

the contributions payment period, P must pay the re-determined amount from the

beginning of the next financial year.

(4) P is taken to revoke a buy-out election if—

(a) a monthly payment is missed; and

(b) the payment is not made within 3 months after P receives a written demand from

the scheme manager”. 17