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Teacher's Pension - Calculating First Month's Pay

Oblivion
Oblivion Posts: 20,248 Forumite
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My wife retired from teaching on 31st August and is in receipt of a pension from the Teachers' Pension scheme (TP) from the 1st September.

TP wrote to her in early September to explain what we were expecting anyway, that her normal payment date would be the day before her birthday and so her first payment would be a partial month ... lets say (it's fictional) 1st Sept to 20th Sept. So far so good.

The letter went on to say how much gross pay this would be and it took me a while to see how they'd arrived at their figure for gross pay. This is what they've done ...

Annual pension divided by 12 to arrive at the Normal Monthly Pension.
Take the NMP and divide it by 31 and multiply by 20 days. This reconciled to the penny the figure they had stated.

BUT September only has 30 days, not 31, so my contention is that they have underpaid her by using the wrong divisor ... in her case by nearly £60!

We phoned TP and after much button pressing and being kept hanging around we were told nobody was available to speak to us now but it would be looked into and we would be called back either later that day or the next day. It was even logged as an outstanding phone call on her 'My Pension' task manager page on their website. This was mid-September and we've never received a call back and the cheeky blighters have just removed the log entry from their task manager. Have they got something to hide?

A couple of days after the promised phone call failed to materialise we wrote to them with my calculations and pointing out that we thought they had used the wrong divisor in their calculation. They've never replied. So we wrote again on 27th Sept to chase it up and we've still had no reply! By ignoring us they really are acting like an organisation that has something to hide. If I'm right about the method of calculation this could have affected a great many teachers who retired in September.

Before I take this any further, probably to my MP, can anybody give me a definitive answer as to whether a divisor of 30 should be used for months containing 30 days, or are TP correctly complying with some perverse ruling to use 31 days for every month that effectively makes a year 372 days?

I'm sure I once saw a test case ruling on this by the courts but my googling has let me down.
... Dave
Happily retired and enjoying my 14th year of leisure
I am cleverly disguised as a responsible adult.
Bring me sunshine in your smile

Comments

  • Nick_C
    Nick_C Posts: 7,565 Forumite
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    Its usual to work out a daily rate by taking the annual rate and dividing by 365, 366, or 365.25, depending on the methodology used to account for leap years.

    Lets assume a 365 day year.

    If your wife's pension is £12K per annum, then dividing the monthly £1K by 31 and multiplying by 20 days gives a payment of £645.16.

    Dividing £12K by 365 and multiplying by 20 gives £657.53.

    The difference between the two methods on a £12K pension is £12.37.

    If your wife is losing nearly £60, that suggests her teacher's pension is almost £60K pa!!!

    I think you might have got your sums wrong!
  • Oblivion
    Oblivion Posts: 20,248 Forumite
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    Nick_C wrote: »
    Its usual to work out a daily rate by taking the annual rate and dividing by 365, 366, or 365.25, depending on the methodology used to account for leap years.

    Lets assume a 365 day year.

    If your wife's pension is £12K per annum, then dividing the monthly £1K by 31 and multiplying by 20 days gives a payment of £645.16.

    Dividing £12K by 365 and multiplying by 20 gives £657.53.

    The difference between the two methods on a £12K pension is £12.37.

    If your wife is losing nearly £60, that suggests her teacher's pension is almost £60K pa!!!

    I think you might have got your sums wrong!

    I think you've missed the point of my question.

    TP have used your former method of dividing her normal monthly pension by 31 and multiplying by 20. My query is, since they've chosen to use that method, legally should they have used 30 as the divisor?

    Oh and don't worry about the actual pension ... it's nothing like as much as that and the 20 days is fictional.
    ... Dave
    Happily retired and enjoying my 14th year of leisure
    I am cleverly disguised as a responsible adult.
    Bring me sunshine in your smile
  • Nick_C
    Nick_C Posts: 7,565 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Home Insurance Hacker!
    OK, but you did say "Take the NMP and divide it by 31 and multiply by 20 days. This reconciled to the penny the figure they had stated" which suggested you were talking about a 20 day adjustment.

    Even if you were talking about a 29 day adjustment, a difference of nearly £60 suggests a pension in excess of £36K, which still makes me wonder if your calculations are correct.

    Expecting comments on a fictional posting isn't really very helpful.
  • Oblivion
    Oblivion Posts: 20,248 Forumite
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    edited 11 October 2013 at 2:05PM
    Good grief, I wish I'd never mentioned any figures now, it's clearly muddying the waters.

    It's an answer to the principle that I'm after ... if a payroll provider has chosen as a method of calculating a part month to take a normal full month and work out a daily rate from there, which TP have most definitely done in this case, should they be applying the actual days in that month as the divisor?
    ... Dave
    Happily retired and enjoying my 14th year of leisure
    I am cleverly disguised as a responsible adult.
    Bring me sunshine in your smile
  • Nick_C
    Nick_C Posts: 7,565 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Home Insurance Hacker!
    In your example, the denominator is the month from 21st August to 20th September, so 31 days.
  • Oblivion
    Oblivion Posts: 20,248 Forumite
    Part of the Furniture 10,000 Posts Photogenic
    Nick_C wrote: »
    In your example, the denominator is the month from 21st August to 20th September, so 31 days.

    Hmmm, interesting interpretation ... but not sure I follow that as she didn't start taking her pension until 1st September. :think:
    ... Dave
    Happily retired and enjoying my 14th year of leisure
    I am cleverly disguised as a responsible adult.
    Bring me sunshine in your smile
  • Nick_C
    Nick_C Posts: 7,565 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Home Insurance Hacker!
    It is peculiar, but the calculation is statutory, regulation 109(3) of The Teachers’ Pensions Regulations (2010).

    http://www.legislation.gov.uk/uksi/2010/990/regulation/109/made

    The amount of the initial payment is DI/DM x AR/12, where—

    DI is the number of days in the period beginning on the payable date and ending on the initial payment date and is 1 where the payable date falls on the initial payment date, and

    DM is the number of days in the period beginning on the day which falls 1 month before the day after the initial payment date and ending on the initial payment date.
  • Oblivion
    Oblivion Posts: 20,248 Forumite
    Part of the Furniture 10,000 Posts Photogenic
    Nick_C wrote: »
    It is peculiar, but the calculation is statutory, regulation 109(3) of The Teachers’ Pensions Regulations (2010).

    http://www.legislation.gov.uk/uksi/2010/990/regulation/109/made

    The amount of the initial payment is DI/DM x AR/12, where—

    DI is the number of days in the period beginning on the payable date and ending on the initial payment date and is 1 where the payable date falls on the initial payment date, and

    DM is the number of days in the period beginning on the day which falls 1 month before the day after the initial payment date and ending on the initial payment date.

    Brilliant Nick, you've finally cracked the case :j :beer:
    That's just what I've been searching for. So the legislation shows I'm wrong and their calculation is apparently right, although I could argue the morals of that legislation until the cows come home. :)

    Thanks very much for finding that and I've bookmarked it for future reference.

    I suspect that the reason TP have ducked the issue is because nobody there is actually skilled in the legislation, relying instead on software programmed by those who have long since been laid off.

    Have a beer on me :beer:
    ... Dave
    Happily retired and enjoying my 14th year of leisure
    I am cleverly disguised as a responsible adult.
    Bring me sunshine in your smile
  • Nick_C
    Nick_C Posts: 7,565 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Home Insurance Hacker!
    Oblivion wrote: »
    I suspect that the reason TP have ducked the issue is because nobody there is actually skilled in the legislation, relying instead on software programmed by those who have long since been laid off.

    Think you are probably right about that. "Computer says no". (cough)
  • gamston
    gamston Posts: 693 Forumite
    Part of the Furniture 500 Posts
    why is the pension divided by anything other then 12 for the months in the year ?
    I get a railway pension they worked out my annual pension, divided by 13 (we are on 4 weekly pension)
    why do teachers get a daily rate ?
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