Teachers' Pension Scheme: Rollback Choices (Faster Accrual)

flexibilly

Thank you @hugheskevi , I think I’m getting there in my understanding of their calculations, and I might be able to correct a couple of the points in my original analysis. The HM Treasury document you linked to is hard going, so please, if you’re willing to have a quick scan over my numbers, or just the summary of my understanding given immediately below, I’d really appreciate it.

The problem with the paragraph from the TPS literature that I reproduced above - on money owed to members by the scheme - is that it mentions the Remediable Service Statement (RSS). This is immediately confusing to an active member as it’s a document they won’t receive until they retire. (Though perhaps it’s technically correct in some way I can’t appreciate.) I’m sure the paragraph talking about the 8% is specific to a short period of time after you’ve retired.

Anyway, my best understanding, currently, from looking at what you say, at the HM Treasury document, and also from trying to do some modelling of my own (see below), is that: For doing the compensation calculations, TPS have deducted tax from teachers’ original flexibilities payments (which of course didn’t attract tax at the time), then used the current NS&I savings rate, right from the start of the remedy period right up to the deadline for making a decision (1st October 2024). I.e., the Direct Saver rate that came into effect on 18th August 2023 (see here: https://www.nsandi.com/historical-interest-rates [“Direct Saver” account])

I think the HM Treasury document might be saying as much in one of the various clauses that states “the rate of interest to be applied must be the NS&I Equivalent Savings Rate for the time being” (I’m just not smart enough to figure out which one of the clauses applies to these compensation payments – it’s repeated many times throughout the doc). (Note also that the NS&I SCHEDULE on p. 40 of the document is out of date (not showing the last 4 rate changes) – see the link above for the latest numbers).

Without your help, I would never have guessed that it’s the current NS&I rate that’s used right throughout the period (do you agree?). I assumed the correct rates would be applied, month by month, from the start of the remedy period up until 1st October 2024…

flexibilly

To try and investigate further, I dug out all the original FA contributions from my payslips and wrote a bit of Python code to deduct tax from them at 20% (which would have been correct for me during the whole period) and then apply the correct historic NS&I rates from the start of the remedy period up until the deadline for making a decision (1st October 2024). It’s not a perfect calculation (e.g., I’m not modelling the correct day of the month that each new NS&I rate comes in), but I think it’s pretty good and note that the compensation amount produced is too low (£9,434.81 when my offer is £10,821.19).

Below are the numbers produced by the code. (Here is the link to the notebook if any other teacher wants to take a copy and put their own numbers in, or if anyone else sees a mistake I’m making, and is willing to correct and re-share it in this thread: https://colab.research.google.com/drive/1ealTWixYOK39IY-r5zGqOYmqIMVsriI8?usp=sharing)

2015/16:

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1.1% for 30 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1.1% for 31 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1.1% for 30 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £518.92; remove tax: £415.14; annual rate of 1.1% for 31 days; new balance: £415.52; (total payslip contributions: £518.92)

Payslip contribution: £186.60; remove tax: £149.28; annual rate of 1.1% for 31 days; new balance: £565.33; (total payslip contributions: £705.52)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 1.1% for 30 days; new balance: £714.11; (total payslip contributions: £890.69)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 1.1% for 31 days; new balance: £863.06; (total payslip contributions: £1075.86)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 1.1% for 30 days; new balance: £1012.11; (total payslip contributions: £1261.03)

Payslip contribution: £192.57; remove tax: £154.06; annual rate of 1.1% for 31 days; new balance: £1167.25; (total payslip contributions: £1453.60)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 1.1% for 31 days; new balance: £1318.10; (total payslip contributions: £1640.62)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 1.1% for 29 days; new balance: £1469.00; (total payslip contributions: £1827.64)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 1.1% for 31 days; new balance: £1620.13; (total payslip contributions: £2014.66)

 

2016/17 (I forgot to opt in this year):

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 1.1% for 30 days; new balance: £1771.34; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1.1% for 31 days; new balance: £1773.00; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 30 days; new balance: £1774.17; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1775.37; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1776.58; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 30 days; new balance: £1777.75; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1778.95; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 30 days; new balance: £1780.12; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1781.33; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1782.55; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 28 days; new balance: £1783.64; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 31 days; new balance: £1784.85; (total payslip contributions: £2201.68)

 

2017/18:

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.8% for 30 days; new balance: £1786.03; (total payslip contributions: £2201.68)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 0.7% for 31 days; new balance: £1946.69; (total payslip contributions: £2401.06)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 0.7% for 30 days; new balance: £2107.40; (total payslip contributions: £2600.44)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 0.7% for 31 days; new balance: £2268.26; (total payslip contributions: £2799.82)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 0.7% for 31 days; new balance: £2429.20; (total payslip contributions: £2999.20)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.7% for 30 days; new balance: £2597.76; (total payslip contributions: £3208.03)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.7% for 31 days; new balance: £2766.47; (total payslip contributions: £3416.86)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.7% for 30 days; new balance: £2935.22; (total payslip contributions: £3625.69)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.95% for 31 days; new balance: £3104.79; (total payslip contributions: £3834.52)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.95% for 31 days; new balance: £3274.49; (total payslip contributions: £4043.35)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.95% for 28 days; new balance: £3444.07; (total payslip contributions: £4252.18)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.95% for 31 days; new balance: £3614.05; (total payslip contributions: £4461.01)

 

2018/19:

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 0.95% for 30 days; new balance: £3784.06; (total payslip contributions: £4669.84)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 0.95% for 31 days; new balance: £3956.42; (total payslip contributions: £4881.30)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 0.95% for 30 days; new balance: £4128.81; (total payslip contributions: £5092.76)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 0.95% for 31 days; new balance: £4301.45; (total payslip contributions: £5304.22)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 0.95% for 31 days; new balance: £4474.23; (total payslip contributions: £5515.68)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 0.95% for 30 days; new balance: £4655.56; (total payslip contributions: £5737.81)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 31 days; new balance: £4837.38; (total payslip contributions: £5959.94)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 30 days; new balance: £5019.20; (total payslip contributions: £6182.07)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 31 days; new balance: £5201.32; (total payslip contributions: £6404.20)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 31 days; new balance: £5383.60; (total payslip contributions: £6626.33)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 28 days; new balance: £5565.57; (total payslip contributions: £6848.46)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 31 days; new balance: £5748.15; (total payslip contributions: £7070.59)

 

2019/20:

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 1% for 30 days; new balance: £5930.73; (total payslip contributions: £7292.72)

Payslip contribution: £224.49; remove tax: £179.59; annual rate of 1% for 31 days; new balance: £6115.51; (total payslip contributions: £7517.21)

Payslip contribution: £326.91; remove tax: £261.53; annual rate of 1% for 30 days; new balance: £6382.28; (total payslip contributions: £7844.12)

Payslip contribution: £275.70; remove tax: £220.56; annual rate of 1% for 31 days; new balance: £6608.45; (total payslip contributions: £8119.82)

Payslip contribution: £275.70; remove tax: £220.56; annual rate of 1% for 31 days; new balance: £6834.82; (total payslip contributions: £8395.52)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 30 days; new balance: £7071.87; (total payslip contributions: £8684.57)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 31 days; new balance: £7309.31; (total payslip contributions: £8973.62)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 30 days; new balance: £7546.75; (total payslip contributions: £9262.67)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 31 days; new balance: £7784.60; (total payslip contributions: £9551.72)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 31 days; new balance: £8022.65; (total payslip contributions: £9840.77)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 29 days; new balance: £8260.45; (total payslip contributions: £10129.82)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 31 days; new balance: £8498.91; (total payslip contributions: £10418.87)

 

2020/21 (I decided to stop paying for FA this year):

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 1% for 30 days; new balance: £8737.33; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 31 days; new balance: £8744.75; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 30 days; new balance: £8751.94; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 31 days; new balance: £8759.38; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 31 days; new balance: £8766.82; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 30 days; new balance: £8774.03; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 1% for 31 days; new balance: £8781.48; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.15% for 30 days; new balance: £8782.56; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.15% for 31 days; new balance: £8783.68; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.15% for 31 days; new balance: £8784.80; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.15% for 28 days; new balance: £8785.81; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 0.15% for 31 days; new balance: £8786.93; (total payslip contributions: £10707.92)

Three years omitted to meet character limit (see the notebook link above if you want them):

2021/22:

[...]

2022/23:

[...] 

2023/24:

[...] 

2024/25 (until the October 1st decision deadline?):

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9291.59; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9320.44; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9348.44; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9377.47; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9406.58; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9434.84; (total payslip contributions: £10707.92)

The final balance (£9,434.84) is too low versus my TPS compensation offer (£10,821.19).

flexibilly

Below, I’m running those calculations again using the current NS&I rate (3.65%), right from the start of the remedy period up to the deadline for making a decision (1st October 2024). Again, it’s still not a perfect calculation (e.g., my payslips disagree slightly with TPS on the total contributions value, their total being lower by a few tens of pounds, but hey ho), but note that the compensation amount produced is now much closer (£10,868.90 when my offer from TPS is £10,821.19).

[EDIT: I think I’m wrong to say this is the interest rate used by TPS. Their calculation is probably complex and unknowable (read the later posts if you’re interested). But I think you can use this calculation to say their approach is fairly generous (or that’s my view at least). I.e., for me, their offer is equivalent to me (paying tax and) saving my flexibility contributions at ~3.65% throughout the remedy period, which I certainly couldn’t have done in practice (e.g., see the actual NS&I rates during the period in the previous post). Although I can’t get to their precise calculation, which does bother me slightly, this modelling effort was still enough to convince me I want to accept their compensation offer...]

[EDIT: in my modelling I probably shouldn’t have been adding interest daily. Probably monthly, or annually. All pointing towards the TPS treatment being generous, in my view. I could never get to a figure as high as theirs, despite trying a few things.]

2015/16:

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £0.00; (total payslip contributions: £0.00)

Payslip contribution: £518.92; remove tax: £415.14; annual rate of 3.65% for 31 days; new balance: £416.42; (total payslip contributions: £518.92)

Payslip contribution: £186.60; remove tax: £149.28; annual rate of 3.65% for 31 days; new balance: £567.46; (total payslip contributions: £705.52)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 3.65% for 30 days; new balance: £717.75; (total payslip contributions: £890.69)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 3.65% for 31 days; new balance: £868.57; (total payslip contributions: £1075.86)

Payslip contribution: £185.17; remove tax: £148.14; annual rate of 3.65% for 30 days; new balance: £1019.76; (total payslip contributions: £1261.03)

Payslip contribution: £192.57; remove tax: £154.06; annual rate of 3.65% for 31 days; new balance: £1177.46; (total payslip contributions: £1453.60)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 3.65% for 31 days; new balance: £1331.20; (total payslip contributions: £1640.62)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 3.65% for 29 days; new balance: £1485.11; (total payslip contributions: £1827.64)

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 3.65% for 31 days; new balance: £1639.81; (total payslip contributions: £2014.66)

 

2016/17 (I forgot to opt in this year):

Payslip contribution: £187.02; remove tax: £149.62; annual rate of 3.65% for 30 days; new balance: £1794.80; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1800.37; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £1805.78; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1811.39; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1817.01; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £1822.47; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1828.13; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £1833.62; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1839.31; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1845.02; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 28 days; new balance: £1850.19; (total payslip contributions: £2201.68)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £1855.94; (total payslip contributions: £2201.68)

 

2017/18:

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £1861.51; (total payslip contributions: £2201.68)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 3.65% for 31 days; new balance: £2027.29; (total payslip contributions: £2401.06)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 3.65% for 30 days; new balance: £2193.37; (total payslip contributions: £2600.44)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 3.65% for 31 days; new balance: £2360.18; (total payslip contributions: £2799.82)

Payslip contribution: £199.38; remove tax: £159.50; annual rate of 3.65% for 31 days; new balance: £2527.50; (total payslip contributions: £2999.20)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 30 days; new balance: £2702.66; (total payslip contributions: £3208.03)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 31 days; new balance: £2878.64; (total payslip contributions: £3416.86)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 30 days; new balance: £3054.85; (total payslip contributions: £3625.69)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 31 days; new balance: £3231.92; (total payslip contributions: £3834.52)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 31 days; new balance: £3409.53; (total payslip contributions: £4043.35)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 28 days; new balance: £3586.63; (total payslip contributions: £4252.18)

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 31 days; new balance: £3765.34; (total payslip contributions: £4461.01)

 

2018/19:

Payslip contribution: £208.83; remove tax: £167.06; annual rate of 3.65% for 30 days; new balance: £3944.22; (total payslip contributions: £4669.84)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 3.65% for 31 days; new balance: £4126.16; (total payslip contributions: £4881.30)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 3.65% for 30 days; new balance: £4308.23; (total payslip contributions: £5092.76)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 3.65% for 31 days; new balance: £4491.30; (total payslip contributions: £5304.22)

Payslip contribution: £211.46; remove tax: £169.17; annual rate of 3.65% for 31 days; new balance: £4674.94; (total payslip contributions: £5515.68)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 30 days; new balance: £4867.22; (total payslip contributions: £5737.81)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 31 days; new balance: £5060.59; (total payslip contributions: £5959.94)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 30 days; new balance: £5254.03; (total payslip contributions: £6182.07)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 31 days; new balance: £5448.60; (total payslip contributions: £6404.20)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 31 days; new balance: £5643.77; (total payslip contributions: £6626.33)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 28 days; new balance: £5837.80; (total payslip contributions: £6848.46)

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 31 days; new balance: £6034.18; (total payslip contributions: £7070.59)

 

2019/20:

Payslip contribution: £222.13; remove tax: £177.70; annual rate of 3.65% for 30 days; new balance: £6230.54; (total payslip contributions: £7292.72)

Payslip contribution: £224.49; remove tax: £179.59; annual rate of 3.65% for 31 days; new balance: £6430.04; (total payslip contributions: £7517.21)

Payslip contribution: £326.91; remove tax: £261.53; annual rate of 3.65% for 30 days; new balance: £6711.67; (total payslip contributions: £7844.12)

Payslip contribution: £275.70; remove tax: £220.56; annual rate of 3.65% for 31 days; new balance: £6953.75; (total payslip contributions: £8119.82)

Payslip contribution: £275.70; remove tax: £220.56; annual rate of 3.65% for 31 days; new balance: £7196.58; (total payslip contributions: £8395.52)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 30 days; new balance: £7450.14; (total payslip contributions: £8684.57)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 31 days; new balance: £7705.23; (total payslip contributions: £8973.62)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 30 days; new balance: £7960.31; (total payslip contributions: £9262.67)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 31 days; new balance: £8216.98; (total payslip contributions: £9551.72)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 31 days; new balance: £8474.45; (total payslip contributions: £9840.77)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 29 days; new balance: £8730.97; (total payslip contributions: £10129.82)

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 31 days; new balance: £8990.04; (total payslip contributions: £10418.87)

 

2020/21 (I decided to stop paying for FA this year):

Payslip contribution: £289.05; remove tax: £231.24; annual rate of 3.65% for 30 days; new balance: £9248.98; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9277.70; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9305.57; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9334.46; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9363.44; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9391.57; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9420.73; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £9449.03; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9478.37; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9507.80; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 28 days; new balance: £9534.46; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £9564.06; (total payslip contributions: £10707.92)

 

Three years omitted to meet character limit (see the notebook link above if you want them): 

2021/22:

[...] 

2022/23:

[...] 

2023/24:

[...] 

2024/25 (until the October 1st decision deadline?):

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £10703.88; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £10737.11; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £10769.37; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £10802.81; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 31 days; new balance: £10836.34; (total payslip contributions: £10707.92)

Payslip contribution: £0.00; remove tax: £0.00; annual rate of 3.65% for 30 days; new balance: £10868.90; (total payslip contributions: £10707.92)

The final balance (£10,868.90) is very close to my TPS compensation offer (£10,821.19).

flexibilly

So my tentative conclusions at this point would be:

1)     The TPS are already deducting tax from teachers’ historic (originally pre-tax) flexibilities purchases (at a rate of 20% in my case) when they do the compensation calculations

2)     The TPS are actually using a favourable rate of interest (the current NS&I rate) from the start of the remedy period (start of 2015/16 financial year) right up until the deadline for a decision about accepting compensation (1st October 2024) when they do the compensation calculations. [EDIT: no, I think I'm wrong to say it’s the current NS&I rate (3.65%), it must be a different approach (see next few posts). But I do think it's possible to conclude it’s a fairly generous approach. Or that’s my view at least...]

3)     Point 4 in my original analysis effort was incorrect: interest is being applied right up until the point you make your decision about accepting compensation (1st October 2024), and it’s actually applied at a good rate, versus the historic reality) – for me personally, this is another slight nudge in the direction of taking the compensation (but there are other reasons mostly based on the age of my children and how that interacts with the age I might retire, and everyone will be different of course)

4)     No extra tax would be due if you accepted a compensation payment from TPS ( @hugheskevi knows this, I think, I’ve just tried to demonstrate it to myself because I don’t think the TPS literature is clear at the date of this post – they are still updating it though, hopefully it will get better…)

As ever, I’m hoping more knowledgeable folk here will jump in and correct me.

hugheskevi

flexibilly said:

The problem with the paragraph from the TPS literature that I reproduced above - on money owed to members by the scheme - is that it mentions the Remediable Service Statement (RSS). This is immediately confusing to an active member as it’s a document they won’t receive until they retire. 

RSS is a broad term, and one will be issued to all members by 31st March 2025. The RSS sent to Immediate Choice members (ie those already retired) will be different to that sent to active and deferred members.

flexibilly said:

I’m sure the paragraph talking about the 8% is specific to a short period of time after you’ve retired.

My understanding is that it is 8% simple interest from the time the payment due arose until 28 days after an RSS is issued. Interestingly, although 8% seems high, over a reasonable period of time due to it being simple rather than compound interest it fast become much less generous.

flexibilly said:

Without your help, I would never have guessed that it’s the current NS&I rate that’s used right throughout the period (do you agree?). I assumed the correct rates would be applied, month by month, from the start of the remedy period up until 1st October 2024…

It is the NS&I rate applicable at the relevant date that is used, so it will change over time.

flexibilly

hugheskevi said:

It is the NS&I rate applicable at the relevant date that is used, so it will change over time.

Ah. Then back to the drawing board I go :-/

Can anyone see where I've gone wrong in the calculation that applies the historic NS&I rates over time? It comes out low, at £9,434.84 versus the TPS compensation offer at £10,821.19.

flexibilly

The HM Treasury document (link) says the scheme manager may switch to using Treasury interest rates after the date of the Directions. That produces a bump but doesn't explain the difference. It also says they can move to using a mean, mode or median interest rate at their discretion. Modelling that would just be guesswork but I think it's possible, depending on how it was done, that it could explain the larger compensation offer.

What they have done, exactly, is unknowable I think (though I might try writing and asking...). I think I'll just have to be satisfied with the fact that whatever they did do works out quite well. Certainly better than if I'd put my flexibility payments, after they were taxed, into an NS&I account each month, at the time, instead.

I'll sleep on it and then I'll update the notebook to reflect my uncertainty (until such time as I might get a reply from TPS) and the fact I'm probably wrong about the 3.65% current NS&I rate being used all the way through the calculation.

I might then come back and do an update if I get a reply from the TPS in time for it to be useful to others (i.e., well before 1st October). As @davepayl says, it's a finely balanced decision, so understanding how your interest has been calculate does matter, imo. If you already know what's going on in the calculation, please do consider enlightening me and other TPS members.

@hugheskevi and other esteemed contributors, do you have any final comments?

hugheskevi

flexibilly said:

The HM Treasury document (link) says the scheme manager may switch to using Treasury interest rates after the date of the Directions. That produces a bump but doesn't explain the difference. It also says they can move to using a mean, mode or median interest rate at their discretion. Modelling that would just be guesswork but I think it's possible, depending on how it was done, that it could explain the larger compensation offer.

What they have done, exactly, is unknowable I think (though I might try writing and asking...). I think I'll just have to be satisfied with the fact that whatever they did do works out quite well. Certainly better than if I'd put my flexibility payments, after they were taxed, into an NS&I account each month, at the time, instead.

I'll sleep on it and then I'll update the notebook to reflect my uncertainty (until such time as I might get a reply from TPS) and the fact I'm probably wrong about the 3.65% current NS&I rate being used all the way through the calculation.

I might then come back and do an update if I get a reply from the TPS in time for it to be useful to others (i.e., well before 1st October). As @davepayl says, it's a finely balanced decision, so understanding how your interest has been calculate does matter, imo. If you already know what's going on in the calculation, please do consider enlightening me and other TPS members.

@hugheskevi and other esteemed contributors, do you have any final comments?

It is probably worth summarising the various regulatory instruments that govern this, and where the relevant information will be. Some of the details you want will be in the Teachers' pension secondary legislation and some of it will be in the HM Treasury Directions.

First is the Primary legislation, which creates the broad powers for the Remedy. This is the Public Service Pensions and Judicial Officers Act 2022.

Secondary legislation made under the Primary legislation gives the powers for individual schemes and sets out in detail how the Remedy will be implemented. For Teachers, this is the Teachers' Pension Scheme (Remedial Service) Regulations 2023.

Supporting the Primary and Secondary legislation are the HM Treasury Directions entitled The Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022.

I think the key areas of uncertainty which will not be included in the above will centre around how exactly the 'mid-point' of amounts due is calculated, and at what date the figures shown are calculated 'as at.' 

Unfortunately, I am not close to the details of how the Teachers' scheme is operating its exercise and the calculations, but all the rest of the details should be within the combination of documents above.

davepayl

Lots of great analysis in these posts - much of it above my head! Just to confirm - the compensation payment would be un-taxed? If it was deducted that would have certainly ruled out that option but I'm still on the fence if not.

hugheskevi

davepayl said:

Lots of great analysis in these posts - much of it above my head! Just to confirm - the compensation payment would be un-taxed? If it was deducted that would have certainly ruled out that option but I'm still on the fence if not.

Under 2015 Remedy, all compensation and interest related to compensation payments is free of tax.