Help with what to do with my pension - Can I claim back tax?

Slovell3003

Good morning,

I wanted to see if anyone could help me with some tax / pension questions. I have called HMRC a number of times and each time the answer has been "we don't know."

I have been paying into a teacher's pension for the last 18 months, however I have now left employment with the university and I am very unlikely to return to teaching work so I was looking to transfer or draw out my contributions.

I have looked at a direct transfer to my new pension but TPS state as I was in employment under 2 years I do not qualify?!

So my other option is to draw out my contributions and then reinvest in the new pension. However TPS are stating I will only get 50-55% of MY contributions (I get nothing from my employers). Surely this cannot be right? As I was earning and still am earning £31,000 so that wouldn't put me in the higher tax bracket even if I got the £5,000 back that I paid in... possibly maybe nearer £7,000 but still....

What I am thinking does TPS possibly assume I am in the higher tax bracket and then I have to claim back the money from HMRC as overpaid tax? As thats where the other 50-55% of money is going!

Any help very much appreciated as I really do not want to lose this money, especially when I was having £250 a month for 18 months taken out my salary... but TPS and HMRC do not want to help or advise!

Sarah

System

Hi

You should consider leaving the money where it is, in the hope/expectation of it increasing with CPI in the coming years.

You may wish to transfer to another scheme, personal or employer based.

However the payments you made are the only part you could have refunded, the employer part does not count.

Normally 55% is used as a penalty for an un-authorised payment, so perhaps you need to clarify what, if any, refund you are entitled to.

If you paid your contributions from gross salary, then any liability to NI and income tax will have to be satisfied, yet again something to be clarified.

On the TPS website this can be found...

What happens to my pension when I leave pensionable employment?

To qualify for benefits you must have two years qualifying service. That can be in the final salary or career average arrangements or a combination of both. You can leave your benefits in the Teachers' Pension Scheme and claim them when you reach your Normal Pension Age, or you can claim them when you’re 55, but they will be reduced.
If you join a new pension scheme you may be able to transfer your benefits to you new scheme.
If you haven’t qualified for benefits you can take a repayment of your pension contributions.

If I apply for a repayment will I get all of my contributions back?

The amount you will be repaid will be the contributions you’ve paid into the Teachers' Pension Scheme together with compound interest added at 3% per annum. Two sets of deductions will be made: one to secure your benefits in the State Pension Scheme and the other for tax.

Slovell3003

Hi John,

TPS have told me if I leave the money where it is, and do not take back teaching employment I will lose the money altogether.

The contributions (My own) were from my gross salary were before tax and NI, but I can't see how this can amount to 55%, 20% Tax based on my current earnings but 35% left for NI does not seem right. Kind of makes it pointless to have a pension if you cannot transfer it out or keep it where it is.

I can't seem to get an answer from TPS regarding this, they say they will refund 45% of my contributions after tax and NI but just seems a lot to me... HMRC will not give me an answer either so I could be in all likelihood getting the money back and by the time TPS and HMRC take their cut me left with a few pennies.

Just horrid trying to get answers!

Thanks,

Sarah.

jem16

Slovell3003 wrote: »

Hi John,

TPS have told me if I leave the money where it is, and do not take back teaching employment I will lose the money altogether.

Unfortunately the case with less than 2 years service. However a transfer should be possible and would be best.

The contributions (My own) were from my gross salary were before tax and NI, but I can't see how this can amount to 55%, 20% Tax based on my current earnings but 35% left for NI does not seem right. Kind of makes it pointless to have a pension if you cannot transfer it out or keep it where it is.

It won't be as much as 55%. You will have to pay the 20% tax and around 1.6% NI as that is the amount that you paid less than the normal rate for being contracted out.

Whoever you spoke to at TPS either hasn't got a clue what they are on about or are including the employer's contributions in that estimate of what you will get back.

You'll get the form you need here;

https://www.teacherspensions.co.uk/members/forms/joining-or-leaving-the-scheme.aspx

Were you paying about 8.6%? If so that would be £2666pa so £3999 for 18 months. You should probably get back a little over £3k.

Slovell3003

Hi Jen,

Thanks for the reply as that is what I was thinking! 20% plus the NI you stated sounds much more like what I was expecting.

This is my most recent reply from TPS when I e-mailed this morning to clarify the deductions. I totally understand me not qualifying for the benefits to transfer but I do want my money back as essentially if I hadn't been in the scheme that would have been in my pay packet.

"If you wish to claim repayment you should complete the repayment application form. After deductions for tax and national insurance you would receive approximately 50% to 55% of the total contributions paid plus 3% compound interest."

Nice to know people know what they are talking about! I have clarified that the above quote it 50-55% of MY contributions....

Slovell3003

Oh and sorry I don't know the percentage I was paying, I think off the top of my head was about 9.9%, but amounted to £275 - 290 a month which varied if I did overtime.

jem16

Slovell3003 wrote: »

This is my most recent reply from TPS when I e-mailed this morning to clarify the deductions. I totally understand me not qualifying for the benefits to transfer but I do want my money back as essentially if I hadn't been in the scheme that would have been in my pay packet.

"If you wish to claim repayment you should complete the repayment application form. After deductions for tax and national insurance you would receive approximately 50% to 55% of the total contributions paid plus 3% compound interest."

Nice to know people know what they are talking about! I have clarified that the above quote it 50-55% of MY contributions....

I suggest you email back and say that as tax would be 20% and NI would be 1.4% (as you've already paid the 10.6% NI rate for a contracted out member) which totals 31.4%, could they please explain how you would only receive 50%-55% of your contributions when it appears that it should be 68.6% that you should receive back.

jem16

Slovell3003 wrote: »

Oh and sorry I don't know the percentage I was paying, I think off the top of my head was about 9.9%, but amounted to £275 - 290 a month which varied if I did overtime.

A salary of £31k would have been 8.6% but I'm sure you can easily check your total contributions by looking back at payslips.

Slovell3003

Hi Jen,

This is absolutely perfect thank you! I just get the feeling they are trying to pull a fast one as they will not give me a breakdown of where contributions go, and have been told if I wish to transfer to another provider this will take about 12 months as it is a very lengthy process and they will deduct 20% admin fees!

Just want to ensure I get the money I am owed and not what they feel like paying out.

Thanks,

Sarah.

Slovell3003

9.5% and £281 so total amount paid about £5,000. Have emailed TPS asking for a breakdown and stating what you said. I will come back here to tell you the outcome!

jem16

Slovell3003 wrote: »

have been told if I wish to transfer to another provider this will take about 12 months as it is a very lengthy process and they will deduct 20% admin fees!

I thought you were told that you were not eligible for a transfer?

If you can transfer then do so as you will also get the employer's contributions and not lose any of your own. The problem is that they will only allow a transfer to another Defined Benefit scheme as the rules now prohibit transfers to Defined Contribution schemes.