Pensions update: Member pension and national insurance contribution
15 February 2012
Discussions between the Government, Trade Unions and employer groups on the longer term outlook for public sector pensions are ongoing. Updates will be posted as changes are confirmed but staff members are also encouraged to view the scheme websites at www.teacherspensions.co.uk and mpfmembers.org.uk
Teachers' Pension Scheme
On 1 April 2012 members’ contributions to the TPS will change from a flat rate of 6.4% of pay for all members to tiered contributions, with the contribution rate dependent on a member’s full-time equivalent earnings. For example, a part-time member of staff working a 50% contract earning £20,000 (full-time equivalent earnings of £40,000) will have a contribution rate of 8% applied to their salary of £20,000. This is because the full-time equivalent salary is the figure used to calculate pension benefits.
Pension contributions attract tax relief and the TPS website at www.teacherspensions.co.uk has a calculator to show the effect on a member's take home pay as a result of the revised contribution rates. LJMU’s contribution rate to the scheme is 14.1% of pay.
There are seven tiered contribution bands and the rates for the 2012/13 scheme year are set out below:
| Lower Salary(£) | Higher Salary(£) | Contribution rate 2012-13 |
|
14,999 |
6.4% |
|
|
15,000 |
25,999 |
7.0% |
|
26,000 |
31,999 |
7.3% |
|
32,000 |
39,999 |
7.6% |
|
40,000 |
74,999 |
8.0% |
|
75,000 |
111,999 |
8.4% |
|
112,000 |
|
8.8% |
Local Government Pension Scheme
The LGPS has had tiered contributions since 2008. There are no changes to the contribution rates for 2012 but the full-time equivalent earnings bands have been adjusted for inflation and the bandings from 1 April 2012 are set out below:
| Lower Salary(£) | Higher Salary(£) | Contribution rate 2012-13 |
|
13,500 |
5.5% |
|
|
13,501 |
15,800 |
5.8% |
|
15,801 |
20,400 |
5.9% |
|
20,401 |
34,000 |
6.5% |
|
34,001 |
45,500 |
6.8% |
|
45,501 |
85,300 |
7.2% |
|
85,300 |
|
7.5% |
Contracting-out rebates to fall from April 2012
Both the TPS and LGPS are contracted-out of the State Second Pension (S2P), previously known as the State Earnings Related Pension Scheme (SERPS). This means that instead of building up entitlement to the additional pension within S2P, employees and employers receive rebates on their National Insurance Contributions (NICs) meaning that NICs are paid at a lower rate than otherwise would be applicable.
The Government has confirmed that the National Insurance rebate will be reduced for both employees and employers from April 2012 resulting in a small reduction in net take home pay for employees and an increase to the employer’s National Insurance bill.
Whether or not you are a pension scheme member you do not pay NICs once you reach your State Pension Age. However you must first obtain a Certificate of Exemption from the Revenue and send it to our payroll department in Kingsway House. The Revenue’s contact number is 0845 302 1479.
For further information and enquiries please contact Jayne Brown (Pensions Manager) on ext: 8756 or email: j.brown@ljmu.ac.uk
