This page lists the latest information and advice on current pension schemes.
Age-related personal tax allowances
Here is information from a Public Service Pensioners' Council briefing in September 2013.
What's the issue?
The government is phasing out the age-related personal tax allowance for pensioners and has stopped new over-65s from having access to age-related tax allowances. This will cut incomes for pensioners with modest occupational pensions. You can send this letter to your MP to tell them about the impact.
Why is the government doing this?
The reason given in the 2012 budget was that a single tax allowance would simplify the tax system and stop so many pensioners having to fill out tax returns. The real reason is that it will save money - £360 million in 2013-14, rising to £1.25 billion a year by 2016-17.
What exactly is happening?
From April 2013 existing age-related allowances will be frozen at their 2012-13 levels (£10,500 for those born between 6 April 1938 and 5 April 1948, and £10,660 for those born before 6 April 1938) until the personal allowance for the under-65s catches up. The personal allowance for the under-65s will be £9,205 in 2013-14. Age-related allowances will no longer be available to people who turn 65 on or after 6 April 2013.
Government policy over the past few years has narrowed the gap between the basic tax allowance and the age-related allowances available to older people.
Personal allowances 2011-12 to 2013-14
|Born after 5 April 1948||Born between 6 April 1938 and 5 April 1948||Born before 6 April 1938|
Why should age-related allowances be kept?
The age-related tax allowance does not exist to feather-bed pensioners. It is a recognition that that as they get older, pensioners have to buy in services in areas such as home maintenance, the cost of which will tend to rise in line with wages. Age-related allowances have been part of the UK tax system since their introduction by Winston Churchill in 1925.
What is the impact on pensioners?
Most private pensions are linked to inflation. If tax allowances are frozen then pensioners' income will be cut in real terms as more of their income will be subject to tax.
What about high-earning pensioners?
High earners don't get the age-related personal allowance. Age-related allowances reduce where the income is above an income limit (£25,400 in 2013-2014) by £1 for every £2 of income above the limit. This applies until the level of the personal allowance for those born after 5 April 1948 is reached.
What does the PSPC want?
The PSPC wants age-related personal allowances to be kept – and for the differential to be restored to at least that which existed in 2011-2012.
The government is introducing major new legislation on pensions which could affect teachers and support staff, depending on their pension status. From October 2012, every employer in the UK will be required to automatically enrol all employees into a qualifying pension scheme.
The changes are being phased in starting with the largest employers first. Employees will still have the right to opt out, but will have to elect to do so.
Members who have opted out of the TPS, or have never been a member of the TPS, will automatically be enrolled into the TPS by their employer at some point between 1 October 2012 and 1 February 2014. Iif you wish to continue to opt out of the TPS you will have to re-submit your opt-out form, within a month of being entered into the TPS.
Members with multiple contracts of employment should note that they will have to opt out of each contract, and that it will be possible for them to opt in to the TPS under one contract and opt out under a second contract. Finally, please note that automatic re-enrolment will take place every three years. Therefore, members who wish to remain 'opted out' will have to re-submit an opt-out form every three years. ATL has produced a factsheet to help members understand the new system.
The Finance Act 2011 reduced the amount of tax-free growth that a member's pension may enjoy in any one tax year. The allowance for growth and input in one year (including employer contributions) is now £50,000. Currently we anticipate that those affected will be mostly high-earners (approximately £80,000+), although you may be caught if you earn less than that, but enjoy a high salary increase in one year. There is a calculator and further information on the Teachers' Pensions website. If you think you will be affected then you should contact an independent financial or tax adviser.
National Insurance increase
From 5 April 2012 the amount of National Insurance contributions you pay will go up. This is because the rebate (or repayment) received by employees in an occupational pension scheme (like the Teachers' Pension Scheme) is being reduced from 1.6% to 1.4%.
This will mean that you will pay an additional 0.2% in National Insurance contributions from April.
The annual change for members (England & Wales and Inner London) is:
|Salary||NI now||NI 2012||Difference|
National Insurance is based on the gross salary unlike tax which is based on the salary after pension contributions have been deducted.
Increase in contributions to the Teachers' Pension Scheme
From April 2012 the contribution rates in the Teachers' Pension Scheme will be tiered and members' contribution rates will go up. To find out how much you will pay, see our page on the 2012/13 rates.
Pension payment increase 2012
Teachers' pensions in payment will increase from 9 April 2012 by 5.2%. Teachers who have retired since April 2011 will receive a proportion of the increase.