An Easy Guide to the Scottish Teachers’ Superannuation Scheme (STSS)
As you may know, changes were made to the STSS and these came into effect on 1 April 2007. Details of these changes are contained in the Member’s Guide issued by the Scottish Public Pensions Agency (SPPA) (pdf).
Further exemplification of any points contained in the guide can be obtained by contacting the SPPA direct on 01896 893048.
The purpose of this guide is to provide a quick Question and Answer reference for members.
Q. How much are my contributions to the STSS?
A. From 1 April 2007, the contribution rate for members is 6.4%. Your employer pays a further 14.9%.
Q. What is the maximum service I can accrue in the scheme?
A. The maximum service you can accrue is 45 years. If, however, you retire at the age of 60 the maximum is 40 years.
Transferring from another scheme
Q. Can I transfer my pension credit to the STSS from another scheme?
A. When you join the teachers’ scheme credit you can transfer your pension from another scheme provided that:
- the previous scheme meets HMRC (formerly known as the Inland Revenue) requirements;
- you apply for a transfer within one year of entering pensionable teaching service.
It is important to remember that the sum of money offered as a transfer value from your previous scheme DOES NOT guarantee you the same amount of service in the STSS as you had in your previous scheme.
Leaving the scheme
Q. What happens to my pension when I leave pensionable employment?
A. If you leave teaching service you have three options open to you depending on the length of your service.
You can leave your pension benefits in the scheme as all periods of reckonable service are added together and used to qualify for benefits. If you have not qualified when you leave, you may qualify later if you return to teaching and claim your benefits at Normal Pension Age (NPA). All "preserved" benefits are increased in line with the cost of living. They are index-linked from the date you leave.
If you take up other employment and you want to transfer your pension rights, you must apply before NPA. You can only transfer them if the new scheme will accept a transfer. The new scheme must satisfy HMRC requirements. If the transfer is to a scheme that cannot accept the Guaranteed Minimum Pension (GMP) liabilities, the GMP element can be transferred to a Personal Pension Scheme or a Buy- out policy with an insurance company.
- If you have been out of pensionable employment for one month and you have not qualified for benefits, you can take a "repayment of contributions". More details about this are on the SPPA website.
Qualifying for benefits
Q. How do I qualify for a pension?
A. You will qualify for benefits if you complete:
- two years’ pensionable employment at any time after 5 April 1988;
- two years’ pensionable employment at any time, if your were in pensionable employment on 6 April 1988;
- five years’ pensionable employment at any time.
If you are in part-time pensionable employment, the whole period counts towards the above qualifying periods. However, only the days you work will count towards your benefits. e.g if you work 0.5 FTE for a year, this counts as one year for qualification, but only 6 months for calculating your benefits.
Calculations of benefits
Q. How are benefits calculated?
A. Benefits are calculated as follows:
A MEMBER PRIOR TO APRIL 2007
If you were a member of the scheme before 1 April 2007 the method of calculating benefits, which will consist of an annual pension and a lump sum based on reckonable service and pensionable salary, is as follows:
Pension = Service x Pensionable Salary
The lump sum is three times the pension.
A MEMBER AFTER APRIL 2007
If you became a member of the scheme on or after 1 April 2007, your benefits will consist of an annual pension based on reckonable service and pensionable salary. It will be:
Pension = Service x Pensionable Salary
There is no lump sum payable.
A MEMBER BEFORE AND AFTER APRIL 2007
If you were a member of the scheme before 1 April 2007 and have reckonable service on or after 2007 your pension will be calculated as at 1. above but you can convert, "commute", part of your pension to receive a lump sum up to 25% of your fund value.
The formula for calculating the maximum amount of lump sum benefits that can be paid is as follows:
(Pension x 20) + ( lump sum x 20/12 )
If you joined the scheme on or after 1 April 2007, the formula for calculating the maximum amount of lump sum benefits that can be paid as follows:
Pension x 20
The above resulting figure represents 25% of the fund value and is the maximum lump sum you may take. A member can choose the amount of lump sum they are paid up to 25% maximum. In doing so there will be a reduction in the value of the annual pension. For each £ 1 of pension commuted there will be £12 of lump sum paid.
Index - Linking
Q. Are the benefits from the STSS index- linked?
A. Yes, for both members who were in the STSS before April 2007 and those who joined after that date. Any increase takes place in April.
From 6 April 2010 you must be aged 55 or over to be eligible for premature retirement. Payment of these benefits are at the discretion of your employer.
After age 55 you may take phased retirement without having a break in employment provided that your pensionable salary reduces by at least 25% for at least 12 months. The maximum you can draw under this arrangement is 75% of your total benefits. The SPPA recommends that you discuss this fully with your employer before deciding on phased retirement.
The winding down scheme is a phased retirement option, which, if you are approaching retirement age, offers you the opportunity to continue in employment on a part-time basis whilst protecting your overall final retirement pension entitlement. There are certain criteria which have to be met, including having a minimum of 25 years’ teaching service of which the last 10 years must have been full-time service and your part-time contract must be a minimum of 0.5 full-time equivalent.
Although the winding down scheme is available to all members who meet the eligibility criteria, it is up to the employer to decide whether or not to offer such a scheme and for the SPPA to approve any application it receives.
Further details of the Winding Down Scheme are contained in the WD1 leaflet available from the SPPA.
ACTUARIALLY REDUCED PENSION
To apply for ARP Retirement Benefits you must be between the age of 55 and 60 on the payable date if you were in service before 1 April 2007. If you joined the scheme on or after 1 April 2007 you must be aged between 55 and 65. In addition you must have:
- Pensionable service or excluded employment on or after 1 July 2002;
- Qualified for retirement benefits;
- An ARP pension which is at least the value of the state guaranteed minimum pension.
If you meet the above criteria you must obtain the consent of your employer to gain immediate access to retirement benefits. Employers can withhold their consent for a maximum of 6 months from the date of the request.
As your pension and lump sum will be reduced, it is very important to seek professional financial advice before deciding on ARP, e.g someone aged 56 would lose approximately 25% of the pension they would have received at the NPA and about 15% of the lump sum.
Ill-health retirement benefits
Q. Does the STSS provide ill-health retirement benefits?
A. If, before you reach NPA you have become permanently unfit because of illness to serve as a teacher, ill-health benefits may be paid. There are two levels, dependent on the severity of your illness.
Total Incapacity Benefit (TIB)is awarded if you are assessed as being permanently unable to teach and unable to undertake any other gainful employment.
Partial Incapacity Benefit (PIB)is awarded if you are assessed as being permanently unable to teach but able to do other work. Members who qualify for PIB will receive a lower level of benefits consisting of service accrued to date of retirement with no enhancement.
Total Incapacity Benefit (TIB) would be granted if, as well as being permanently unable to teach, you are assessed as having your ability to carry out any work impaired by more that 90% and likely to permanently to be so. The maximum amount of enhancement you may receive if you are awarded TIB is half the service you could have completed before normal retirement age (NPA).
Death and family benefits
Q. What is payable when I die?
A. A lump sum death grant three times your pensionable salary will be paid if you have not retired and a pension may be paid to your dependents. If you have retired, your dependents would receive five times your pension less the pension paid to the date of death. For further details about death grants look at the SPPA website or contact the SPPA. When you die, as well as paying the Death Grant, the STSS will pay pensions to your widow, widower, Civil Partner, nominated partner, children or other dependants if you qualify for benefits.
Q. When can I apply for retirement benefits?
A. You should apply about four months before the date you wish to draw your pension. Your employer will be able to give you the relevant form to complete; alternatively you can download these from the SPPA website. You must apply for your pension, it does not come automatically when you are 60.
The information contained in this guide is correct at the time of publication but the statutory regulations governing the scheme, namely the Teachers’ Superannuation (Scotland) Regulations 2005 (as amended), set out the conditions for entitlement and determine the rate at which benefits are payable.