Improving Your Pension
Those who are in paid employment and contribute to the pension scheme can take steps to improve their pension. There are three routes available.
The Standard Early Retirement Reduction Buy Out (ERRBO)
For those who join the new Scottish Teachers Pension Scheme (STPS) 2015 there is a facility to pay extra contributions to reduce or remove the normal early retirement reductions which apply if a scheme member retires after 65 but before reaching the State Pension Age. In STPS 2015 the Normal Retirement Age is the same as the State Pension Age.
SPPA has determined that this facility will only be offered once and within 6 months of joining the scheme. For those who joined the Scheme from 1 April 2015 the election must be made before 1 October 2015 and arrears of contributions will be back dated to the start date. For those who commenced employment in August there will be 6 months from the start date to opt for ERRBO.
The SPPA’s position, is that a new scheme member must plan now for a retirement which may occur many years from now, is a strange position which we will challenge. Full details are on the SPPA website.
Buying Additional Pension
Additional Pension can be bought by those who are in the Scottish Teachers Superannuation Scheme (STSS) (Normal Pension Age 60 or Normal Pension Age 65) or who joined (or later join) the Scottish Teachers Pension Scheme (STPS) 2015. Additional Pension can be bought in multiples of £250. There is a maximum which can be bought. Currently the maximum is £6,300 for STSS and £6,500 for STPS 2015. Both are index linked and Scottish Public Pensions Agency updates the figures.
SPPA will provide a quotation on request which takes account of your age and Normal Pension Age, the amount you wish to purchase and whether you wish to pay by lump sum or monthly salary deductions.
Faster Accrual Rates
For those in STPS 2015 there is an option to make an annual election to pay a higher accrual rate (1/45, 1/50 or 1/55) rather than the normal contribution rate in the new scheme of 1/57.
There is a factsheet on the SPPA website which provides an illustration of how faster accrual rates build up the career average pot annually. The Career Average provisions means that the value of the pot increases annually in line with the annual pension increase order plus 1.6%.
A request to opt in to a faster accrual rate must be on an annual basis and will run from 1 April to 31 March.
Further information can be found on the SPPA factsheet.
Additional Voluntary Contributions (AVCs)
It has been open to teachers to purchase Additional Voluntary Contributions to enhance their pension pots. This can be paid for by deduction from salary through the Prudential which is the in-house provider across the three teachers' pension schemes in the UK or by a free standing AVC which is paid for separately. Since 6 April 2015 there is greater flexibility about taking money out of Teachers' Additional Voluntary Contributions.
There may be implications for those who have elected to buy additional pension who wish to avail themselves of ERRBO. Also, there may be implications for those who have additional benefits in relation to the Annual Allowances for taxation purposes. Finally, the EIS cannot provide financial advice on the relative merits of these provisions. You will be aware that the Institute set up EIS Financial Services to provide independent financial advice to members, but the main body does not offer direct financial advice.